Disney+ To Add Advertising Supported Tier

Much of the discussion on the quarterly conference call for The Walt Disney Co. on Wednesday concerned its theme parks rebounding from COVID-19 closures and the streaming business. For the latter, CEO Bob Chapek announced that Disney+ will be adding a tier with advertising later this year.

“We’re expecting a very positive reaction from advertisers overall,” Chapek said in the Q&A session with analysts.

“They have been asking for this for years,” said the CEO, who predicted advertiser excitement over the Disney+ availabilities, which will be pitched in the upfront with ABC and the linear cable networks, along with other digital properties.

At this point, Disney isn’t offering any details about pricing for the AVOD service. However, CFO Christine McCarthy advised analysts to look at Hulu, which is majority-owned by Disney. Hulu’s website shows the current price for the ad-supported tier is $6.99 per month.

For the fiscal second quarter ended April 2, Disney reported revenues up 5% for its linear networks to $7.1 billion, with operating income down 1% to $2.8 billion. The weakness was at the international channels.

For the domestic channels, revenues grew 8% to $5.8 billion and operating income rose 3% to $2.3 billion. The company noted that higher operating income at the broadcasting segment was partially offset by lower operating income at cable.

“The increase at broadcasting was due to higher results at the owned television stations and, to a lesser extent, at ABC. The increase at ABC was due to higher affiliate and advertising revenue, partially offset by higher programming and production costs and an increase in marketing costs,” the company said it its press release.

“Broadcasting results benefitted year-over-year from affiliate revenue growth, in addition to higher advertising revenue due to the timing of the Academy Awards, which aired in Q2 this year versus Q3 last year,” McCarthy said on the conference call.