1
Credit: Inside the MagicDisney is getting so desperate for its proprietary streaming service to actually make a consistent profit that it is undercutting its own ad rates and tanking the rest of the market in the process.
The transition to a streaming-dominant entertainment industry has been anything but smooth for the Mouse.
Disney+ was launched in 2019 with a massive advertising campaign and the promise that it would include nearly every TV show, movie, special, or cartoon that the company had ever produced (aside from one specific element that it is systemically purging), plus brand-new original content like live-action Star Wars series and exciting expansions to the Marvel Cinematic Universe.
Combined with the catalogs for National Geographic, Pixar, Fox, and (eventually) Hulu, it should have been a sure-fire hit.
At first, the low cost of a Disney+ subscription (initially priced at $6.99 a month, undercutting Netflix Basic’s $8.99) and its massive IP catalog was a hit, and the service quickly signed up millions of people.
There was just one problem: streaming services don’t actually make that much money. Streaming services like Apple TV+ and Amazon Prime Video are owned by massively profitable tech companies, which allows them to run at a loss, while others, like Tubi and Peacock, simply load up on ads to try to make some money.
Related: Desperate Netflix Offers “Vastly Reduced Price” Before New Disney+ Bundle Hits Market
In fact, for nearly five years, Disney+ ran at a loss for the company, costing the Mouse House billions of dollars every year. Upon his return to Disney leadership, CEO Bob Iger was blunt about how much money streaming was losing, even as he doubled down on it as the future of the company. In an interview with CNBC’s Squawk on the Street, Iger said:
“We ended up losing a lot of money on that, more so than we expected initially. Part of that was because we were chasing sub[scriber] growth and not as focused as we needed to be on the bottom line… I came back, and the losses were around $4 billion a year. It was clear that that was not sustainable and not acceptable, and the goal was first, let’s reduce those losses.”
It seems that Bob Iger is trying out a new tactic because Disney is now offering deep discounts to advertisers to try to secure long-term commitments (per Variety). In translation, this means that Disney is offering to take a loss in the short term to try to make up for lost money over time, which is rarely a sign of a healthy business.
According to a new report, Disney+ is offering a 10-15% discount in cost per mille (CPM), the average cost of one thousand ad impressions, or the average payment every thousand times internet services load an ad.
It is one of the primary metrics by which ads are sold on streaming services, and the fact that Disney is aggressively undercutting its own prices in a bid to secure advertising across its various properties (presumably Hulu and ESPN+, among others) is having a seismic effect on the industry.
Disney+ is one of the most prominent services in the streaming marketplace, and by reducing its CPM prices, it will force rivals like Max (owned by Warner Bros. Discovery), Peacock (NBCUniversal), and Netflix to do the same to remain competitive.
Related: Disney Explains Why It Keeps Changing Disney+ Streaming
Essentially, Disney may be starting down a slippery slope in which it devalues its own property in order to try to make some money down the line. The report suggests that “some of Disney’s rate capitulation has angered rivals, who had hoped not to roll back their numbers to such a degree, and are being forced to do so in order to match Disney’s offer.’ There are media partners who are going to be aggressive and try to win share.'”
Disney+ is struggling more than ever before, but this time, it could be dragging down the entire streaming market with it.
Do you think Disney+ is flailing for any new chance to make extra money? Tell us in the comments below!