Disney+ ad-supported tier may not be a big hit: here’s why

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Disney+ launched its much-anticipated ad-supported tier for $7.99 a month on Thursday. Shares of the entertainment conglomerate are slightly up this morning.

Alex Kantrowitz reacts to the news

Walt Disney Co (NYSE: DIS) expects its ad-supported tier to help boost subscriber growth and revenue.

But the Founder of Big Technology – Alex Kantrowitz says it might fail to reap those benefits considering the new ad-based subscription costs just as much as Disney+ was so far charging for its ad-free offering.

They’re releasing ad platform ass the same price as the ad-free offering they had beforehand. So, you’re not going to get that reduction in churn. I think it’s a strategic mistake for Disney. If it wanted to make some moves, I’d lower the price.

The ad-free tier will now cost $10.99 a month. For the year, Disney shares are down more than 40% at writing.

Netflix is winning the price war

It’s also noteworthy that its arch-rival, Netflix Inc is charging a lower $6.99 for the ad-supported subscription. On top of that, it’s considering multiple ad-based tiers, some of which may cost even less.

That makes Disney+ less attractive, especially in the midst of an economy that looks headed for a recession. On CNBC’s “Worldwide Exchange”, Kantrowitz said:

If these companies want their ad-supported tiers to be successful, I’d expect that they’ll lower even more as we go through times of savings rates going down and people’s expectations of spending to go down over the years to come.

About a week ago, Disney CEO Bob Iger reiterated the need for shifting focus in streaming to profitability as Invezz reported here.

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