Netflix is projected to surpass Disney+ in US ad revenue by 2024, says report
Netflix to Outpace Disney+ in U.S. Advertising Race
December 12, 2023 – 3:10 AM PST
According to an Insider Intelligence report, Netflix is projected to surpass Disney+ in the competition for U.S. advertising dollars next year. The report reveals that price increases and a crackdown on password-sharing will attract more viewers to Netflix’s ad-supported plan.
The report, exclusively shared with Reuters, indicates that Netflix’s ad revenue is expected to increase by 50.3% to approximately $1 billion next year.
Meanwhile, Disney+ is predicted to experience a 16.1% rise in revenue from commercials, reaching around $912 million in 2024. However, Disney+ will end this year with approximately $100 million more in ad sales compared to Netflix.
This forecast highlights the success of Netflix’s crackdown on password-sharing, which contributed to the addition of nearly 9 million subscribers in the September quarter. The ad-supported plan accounted for almost a third of these sign-ups.
In October, Netflix also raised the prices of its commercial-free plans to encourage more customers to opt for the cheaper ad-supported offering, which was introduced in November last year at a cost of about $7 per month.
Netflix has been able to sell ads at a slightly higher price than its competitors by capitalizing on the pent-up demand from advertisers who had been waiting for its ad-supported option for years, according to Insider Intelligence analyst Ross Benes.
“Because viewers tend to spend more time per day with Netflix than with other streaming services, Netflix’s ad revenues are poised to grow significantly,” said Benes. He added, “Disney is struggling more right now because they have had all these box office bombs.”
However, the report suggests that Disney could narrow the gap by increasing the adoption of its ad-supported plan and merging Disney+ and Hulu into one app.
Currently, about 5% of Netflix’s U.S. subscribers are shown commercials, while the figure is 17% for Disney+. Next year, it is expected to rise to approximately a fifth of Disney’s subscribers and a slight growth to 7.5% for Netflix.
“Disney is betting a lot of the future of the company on this streaming service, and advertising has always been a key part of it. They need to get more people on the ad plan,” the report stated.
Reporting by Chavi Mehta in Bengaluru; Editing by Sriraj Kalluvila
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How does Netflix’s competitive advantage, such as selling ads at a higher price and higher viewer engagement, position it for significant ad revenue growth compared to Disney+
Edited by Jacqueline Brasinikas
Title: Netflix Set to Surpass Disney+ in U.S. Advertising Competition
Introduction
Streaming giants Netflix and Disney+ have been engaged in a fierce battle for dominance in the U.S. streaming market. However, a recent report by Insider Intelligence underscores Netflix’s projected success in outpacing Disney+ in the race for advertising dollars. This article will delve into the factors contributing to Netflix’s expected lead in ad revenue, including price increases and a crackdown on password-sharing.
Netflix’s Expected Ad Revenue Growth
According to the exclusive report shared with Reuters, Netflix’s ad revenue is anticipated to climb by 50.3% to reach approximately $1 billion in the coming year. This substantial growth reflects the success of Netflix’s strategies to attract more ad-supported subscribers, resulting in increased advertising revenue.
Disney+’s Projected Ad Revenue Growth
On the other hand, Disney+ is predicted to experience a 16.1% rise in revenue from commercials, reaching around $912 million in 2024. Despite this growth, Disney+ will end this year with approximately $100 million more in ad sales when compared to Netflix. However, Netflix’s recent efforts have positioned it favorably to close this revenue gap.
Crackdown on Password-Sharing and Increased Prices
Netflix’s crackdown on password-sharing has played a significant role in the platform’s success. This initiative has attracted nearly 9 million subscribers in the September quarter alone, with the ad-supported plan accounting for a significant portion of these sign-ups. This move has not only contributed to a surge in subscriptions but has also paved the way for increased ad revenue.
Additionally, Netflix raised the prices of its commercial-free plans in October, prompting more customers to opt for the cheaper ad-supported offering introduced in November last year. This strategic pricing structure has successfully attracted new subscribers and bolstered the growth of ad revenue.
Netflix’s Competitive Advantage
Netflix has been able to sell ads at a slightly higher price than its competitors due to the pent-up demand from advertisers who had been waiting for its ad-supported option for years. This advantage, coupled with the fact that viewers spend more time per day with Netflix than with other streaming services, positions Netflix for significant ad revenue growth.
Challenges for Disney+
The report highlights Disney’s struggles due to recent box office disappointments. With several underperforming movies, Disney has faced setbacks that have impacted its ability to generate revenue and attract advertisers. To counter these challenges, the report suggests that Disney could narrow the advertising revenue gap by increasing the adoption of its ad-supported plan and merging Disney+ and Hulu into one app.
Projected Subscriber Figures
Currently, approximately 5% of Netflix’s U.S. subscribers are shown commercials, while this figure stands at 17% for Disney+. However, next year, a rise to approximately a fifth of Disney’s subscribers is expected, with a slight growth to 7.5% for Netflix. These projected figures highlight the potential for increased advertising revenue for both platforms.
Conclusion
In the battle for U.S. advertising dollars, Netflix’s strategic moves, including a crackdown on password-sharing and price increases, have positioned it ahead of Disney+. With substantial growth projected in ad revenue, Netflix is set to outpace Disney+ in this competitive arena. Nonetheless, Disney has a plan to bridge the gap by increasing the adoption of its ad-supported plan and consolidating its streaming services. The coming year will prove crucial in determining the ultimate winner of the U.S. advertising race within the streaming industry.
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