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The Disney+ AVOD Opportunity

4 MINUTE READ | December 8, 2022

The Disney+ AVOD Opportunity

The arrival of ads on Disney’s flagship streaming platform Disney+, slated to release this month, comes at a pivotal moment for the TV advertising industry. 2022 was marked by consolidation and corporate restructuring as media conglomerates, Hollywood studios, and streaming platforms recalibrated their business models in the face of economic volatility, evolving market trends, and viewer demands. With 2023 on the horizon and streaming TV only growing more popular, ad buys on Disney+ offer a unique, first-mover advantage to brand advertisers on the lookout for new opportunities to engage premium audiences at scale. 

The news that Disney+ would soon introduce an ad-supported subscription offering (AVOD) was well-received, with analysts, advertisers, and shareholders noting that the move allows Disney to strategically expand access to a broader audience, rake in ad dollars, and serve as a critical step on the path to reaching 260 million Disney+ subscribers by 2024, one of the company’s long-term goals for the streaming platform. 

In the months since the announcement, Disney has continued to post strong quarterly subscriber growth across its core streaming platforms, Disney+, Hulu, and ESPN+, as its competitors scrambled to do the same. Disney+ subscriptions grew an incredible 31 percent in the most recent quarter to reach 152.1 million global subscribers. In total, Disney’s global subscribers across platforms (ESPN+, Hulu, and Disney+) reached 221 million, edging past Netflix’s 220.7 million global subscribers. In North America, Disney+ is in 44.5 million homes across the U.S. and Canada. Disney+ sign-ups during the most recent quarter were no doubt bolstered by the release of popular TV shows and movies across hit franchises like Star Wars and Marvel. The company’s skyrocketing growth stands in sharp contrast to its competitors, like HBO Max and Netflix, which faced stalled subscriber growth, budget cuts, and corporate restructuring amid larger business challenges throughout most of this year. 

Exclusivity deals for live sports, day-after-airing access, streaming rights, and bypasses to theatrical releases are all-pervasive across the streaming TV landscape as streaming platforms compete for a leg-up against rival services. The Washington Post aptly described this current moment, claiming that streaming TV is having “an existential crisis.” Recent months have been dotted with a flurry of exclusive content deals and platform developments as streaming platforms wrestle for market dominance against the backdrop of increasing consolidation, budget cuts, rising prices, and changing viewership trends. Despite these challenges, viewers remain resilient and committed to their favorite platforms and content as cord-cutting grows and streaming’s popularity continues to rise. Nielsen recently reported, for the fourth consecutive month, that watch time with streaming TV platforms usurped broadcast and cable TV viewership. 

Meanwhile, Disney’s ad sales and technology team has moved quickly ahead of the launch of ads on Disney+, selecting The Trade Desk as the company’s exclusive technology and audience addressability partner, building its ad platform, and unveiling new subscription offerings. Disney+ currently boasts 44.5 million U.S. subscribers and is expected to grow by more than 60 percent over the next four years, as analysts expect the lower-priced, ad-supported tier to drive more signups for the streaming service. 

Disney+ Basic, the Disney+ ad-supported subscription tier (AVOD), will launch on December 8 for $7.99/month, a lower price point than the ad-free Disney+ subscription ($10.99/month). In presentations with agencies and brands, Disney touts that Disney+ Basic will feature “half the ad load of Hulu,” enabling a more premium, high-quality viewing experience for subscribers. A light ad load differentiated by content type is to be expected, with frequency caps, and advertisers are encouraged to provide varied creative to reduce viewership fatigue. Ads for alcohol brands or political causes will not be allowed on the platform, nor will ads promoting competing streaming platforms or content. 

Disney will be offering pre-roll and mid-roll ad slots across short-form and long-form content on the platform, with all formats being non-skippable. This inventory will only be available via a direct partnership or programmatic guarantee. Creative lengths will be limited to :15s and :30s assets, with longer-form assets available for Disney+ to review on a case-by-case basis. As a best practice, Disney recommends two to four versions of creative to be rotated during a flight to avoid viewer fatigue. All creative is subject to approval by Disney and must be COPPA compliant. Above all, Disney aims to ensure ads aren't a deterrent to the viewing experience, and as a result, ad load will be limited to four minutes or less per hour and will vary by content type with a frequency of 1 per hour, 2 per day, or 12 per week. 

At launch, Disney+ ad inventory will be run-of-site (ROS) across Disney’s portfolio of streaming content. Because advertisers won’t have the ability to apply any targeting parameters, ads on Disney+ will be a great opportunity for advertisers looking to capitalize on a mass reach opportunity. According to Disney, performance during the first year will be used to better understand how viewers are engaging with ads, with audience targeting capabilities to be introduced near the end of 2023, in addition to new ad products as the Disney+ offering grows more sophisticated over time. 

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As streaming giants evolve their platforms with the latest technology and content, the streaming landscape continues to grow more nuanced, requiring advertisers to maintain agility across their investments to better engage audiences across platforms and content types. PMG continues to encourage brands to be willing to learn and test trends and new opportunities as they arise, allowing for a first-mover advantage in the ever-evolving streaming TV landscape. 


Posted by: Natalee Geldert

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