Disney Company will be raising their prices for ad-free Disney+ and Hulu, hoping to drive viewers back to ad-supported content.
According to Disney’s reports of their fiscal third quarter, which ended July 1, Disney+ is losing subscribers and revenue. This is the streaming service’s third straight quarter of declines in the U.S., Canada, and India, with 300,000 fewer subscribers than last quarter in the U.S. alone. This quarter, streaming cost the Disney Company $460 million, when a year ago it earned $1.4 billion.
An extensive price hike is CEO Bob Iger’s idea of a solution to make the streaming services profitable again. Ad-free Disney+ will go up by 27% to nearly $14 per month, and ad-free Hulu will rise to $18, a 20% price hike that will make it more expensive than the most popular tier at Netflix for the first time.
Iger is quite open that the price hikes are expected to steer current and new subscribers away from the ad-free tiers and back to cable-like ad-supported tiers, which are not increasing in price.
The advertising market for streaming is “picking up,” Iger said. “We’re obviously trying with our pricing strategy to migrate more subs to the advertising supported tier.”
Which means that there is more profit to be made off of subscriber numbers as a product than as individual customers themselves.
As well as charging more for a product they aren’t improving, Disney Company intends to recapture some of that revenue by cracking down on password-sharing between households. Analysts have their doubts about the wisdom of that – a similar move by Netflix in the past few months has harmed that company’s revenue and number of subscribers significantly.
Disney Company, which is heavily propped up by the revenue of their theme parks, has had a number of hard shakes to their brand confidence lately, between the pandemic, the unpopular park changes by former CEO Bob Chapek, and the return of also unpopular CEO Bob Iger. This may prove to be another stumble.
