Now streaming with ads is getting more expensive

When I last looked at streaming subscription prices this summer, it had been getting more expensive to stream without ads, as companies like Netflix, Disney, and Warner Bros. hoped to push consumers to their lower-cost but often more profitable ad tiers.

Since then, many of these companies have raised their rates — particularly on ad-supported subs. Hulu went up $2 to $9.99 per month for ads and just $1 to $18.99 for ad-free. It was the same situation for Paramount+, whose ad price grew to $7.99 from $5.99, while ad-free went to $12.99 from $11.99. Meanwhile, Disney+ and Peacock raised their prices $2 for both ad-supported and ad-free tiers.

What’s going on? First off: they can. Second off: even if they raise rates on ad-supported subscriptions, those prices are still cheaper than ad-free. So raising prices on ad-free tiers, even if it’s less of a raise than on ad tiers, will still push people to the ultimately cheaper ad tiers, which are more profitable than ad-free.

Here’s Disney CEO Bob Iger saying just that:

“It’s not just about raising pricing. It’s about moving consumers to the advertiser-supported side of the streaming platform,” he said after today’s earnings report. “The pricing that we recently put into place, which is increased pricing, was actually designed to move more people in the AVOD direction,” or advertising-based video on demand, “because we know the ARPU and interest in it from advertisers and streaming has grown.”

About 60% of all new subscribers chose the ad-supported plan. Some 37% of total subscribers in the US currently subscribe to that tier. Disney reported a streaming profit — $321 million in Q4 up from $47 million in Q3 — for its second quarter in a row.