Disney+ to launch cheaper ad-supported tier later this year

In this photo illustration the Disney+ logo seen displayed on a smartphone screen.

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Disney announced on Friday a new ad-supported tier for its Disney+ streaming service that will launch in the U.S. later this year.

Disney did not provide a launch date or price for the new tier. The new ad-supported tier will expand internationally in 2023.

The company said in a press release that the new offering would be “a building block” in achieving its goal of reaching 230 million to 260 million Disney+ subscribers by 2024.

Adding an advertising-support tier will allow Disney to boost average revenue per user — a metric that currently trails most rivals. Comcast Chief Executive Officer Brian Roberts said last quarter NBCUniversal’s Peacock had ARPU of nearly $10 per month per user, driven largely by advertising. The average revenue per user per month for Disney+ in the U.S. and Canada was $6.68 last quarter.

WarnerMedia’s HBO Max, Paramount Global’s Paramount+ and Discovery’sDiscovery+ are among the streaming services that already offer advertising-supported streaming options.

Hulu, majority owned by Disney, also already offers an ad-supported product for $6.99 per month, compared with its ad-free service, priced at $12.99 per month. Disney is streamlining backend technology to enable selling advertising on all of its streaming products, according to a person familiar with the matter.

Disclosure: Comcast is the owner of CNBC parent company NBCUniversal.