Why Disney+ Added an Ad Tier
On December 8th, 2022, Disney+ added a new service tier.
For a lower price, consumers could subscribe to the wildly popular streaming service.
Walt Disney Company
There was just one catch. These viewers had to watch ads as part of their subscription.
To some, the very thought of that defeated the purpose of watching something on streaming.
Disney+
The new technology was supposed to liberate people from the tyranny of broadcast television and its infernal commercials.
As you’re about to see, that didn’t happen. In truth, it’s more like the opposite of that.
Disney+
Here’s why Disney+ added an ad tier. Oh, and we’ll discuss Mufasa: The Lion King’s streaming performance, too.
About Disney’s Ad Tier
Disney+
The best deal on streaming right now involves two companies. It’s the Disney+/Hulu/Max bundle.
For whatever reason, Warner Bros. Discover (WBD) and Disney brokered a revolutionary deal.
Disney+
You can subscribe to all three services for the price of $16.99 per month with ads or $29.99 per month for the ad-free version.
That discrepancy may confuse you, as the ad-free version costs 77 percent more than the one with commercials. That’s a lot, right?
Photo: Getty
Why are two companies as large and revenue-driven as WBD and Disney taking so much less money for the ad tier?
The answer is obviously that they’re not. In truth, it’s quite the contrary.
Iconic media companies who have switched to streaming have quickly learned the math of this business.
Long story short, people tend to binge-watch a lot of programming, as you’ll see once again when we get to the Acquired chart.
Photo: Disney Careers
So, a streaming service can dispense a LOT of ads to unsuspecting customers who need their Seth MacFarlane fix.
I vividly recall speaking to one of the best business writers in the world a couple of years ago.
Image: The Wall Street Journal
While explaining the logistics of streaming, I casually mentioned the average revenue by user (ARPU) for Hulu + Live TV.
That’s the Hulu service that combines the regular streaming content with a skinny bundle of cable programming.
At the time, Hulu + Live TV charged $79.99 for its service. Its ARPU was over $84.
The financial expert understandably thought I’d gotten my numbers wrong. When I linked him to the financial report, it was a record-scratch moment.
He realized that Disney earns so much on Hulu advertising that it’s profiting more from the service than it actually charges customers.
That’s the highest-margin business imaginable.
People Don’t Mind Ads
I’ll preface this section by stating that I hate few things in life more than commercials.
When I switched to streaming in 2007-2008, I thought I’d left the tyranny of television commercials behind forever. Alas, they chased me across formats.
Disney+
Nowadays, companies like Tubi and Pluto TV don’t even offer subscription services. They make all their money by distributing commercials.
You may believe that’s not the way the average viewer consumes media, but you’d be wrong.
Wall Street Journal
According to Nielsen’s new supplement to The Gauge, “72.4% of TV viewing was on ad-supported platforms” during the first quarter of 2025.
Folks, that’s about three-fourths of all streaming viewers happily accepting ads in exchange for cheaper/free subscriptions.
Photographer: Pavlo Gonchar/SOPA Images/LightRocket/Getty Images
This is the business model paving Disney’s path to profitability for its streaming services.
I’m confident we’ll hear more data along these lines this week during Disney’s company’s quarterly earnings report.
You don’t even need to wait until then to realize the truth of the matter, though.
During the quarter when Disney+ added an ad tier, Disney’s Direct-to-Consumer (DtC) business lost $1.05 billion…in three months!
DtC was profitable last quarter. That’s how much advertising changed the game for Disney’s streaming business.
While I’ll never understand it, many customers will happily save $13 a month for Disney+, Hulu, and Max in exchange for suffering through commercials.
Photo: Wikimedia
Personally, I wouldn’t make that trade, but Nielsen suggests that only 27.6 percent of the population agrees with me.
Disney’s Streaming Hits for the Week
Photo: Bluey.tv
Now that you know the reason why Disney’s turning a profit, let’s discuss the products fueling the machine.
For the week of March 31st through April 6th, Disney+ claimed three hit programs.
Photo: Ludo Studios
One was Bluey, which is back over one billion minutes…barely. It had 1.05 billion minutes watched for the week.
Another program is Moana 2, which is fading a bit as I’d anticipated. The popular sequel managed 462 million viewer minutes.
Disney
While that’s pretty good, it’s certainly no Moana. And it also wasn’t Disney’s biggest hit movie for the week.
That honor belongs to Mufasa: The Lion King, which debuted on streaming with a modest 540 million minutes.
Disney
In the immortal words of Voldemort, “I must say I’d hoped for better.” Disney executives won’t admit it, but they did, too.
On the bright side, Disney’s Acquired chart dominance continued. Here are Hulu’s biggest hits for the week:
- Grey’s Anatomy – 1.059 billion viewer minutes
- The Rookie – 725 million viewer minutes
- NCIS – 681 million viewer minutes
- Family Guy – 633 million viewer minutes
- Bob’s Burgers – 610 million viewer minutes
- Law & Order: Special Victims Unit – 600 million viewer minutes
Family Guy
One thing I’ve been meaning to mention about Family Guy is that its new season started in February.
So, this show receives a viewer bump whenever a new episode becomes available on Hulu.
Bob’s Burger
The same statement applies to Bob’s Burgers and The Rookie, but the latter show seems to get a bigger boost than the former.
Overall, this was one of Disney’s best streaming weeks in a while.
I’m still disappointed by Mufasa’s slow start and Moana 2’s lack of staying power, though.
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Feature Photo: Forbes
