The Walt Disney Co. announced this week that it is raising the price of its streaming services starting Oct. 12, including the ad-free version of Disney+ and Hulu, which will both see significant increases. The ad-free version of Disney+ will increase by 27% to $14/month, while the ad-free version of Hulu will rise 20% to $18/month. Disney CEO Bob Iger acknowledged that despite operating-income improvements and cost-cuts of streaming losses over the last three quarters, the entertainment company faces a “challenging environment” in the near-term.
“We’re obviously trying with our pricing strategy to migrate more subs to the advertiser-supported tier,” said Iger.
While most of Disney’s streaming services are seeing an increase in price, Disney is also launching an ad-supported streaming service in select markets in Europe and Canada beginning Nov. 1.
According to PYMNTS, Disney+ streaming service experienced a decline in subscribers during the fiscal third quarter. The company reported that Disney+ had 146.1 million subscribers globally, which is 7.4% less than the previous quarter’s 157.8 million. In the U.S., Disney+ lost 300,000 subscribers, bringing the total to 46 million. However, Disney-owned Hulu saw a slight increase in subscribers, gaining 100,000 for a total of 48.3 million. Iger mentioned plans to create a one-app experience for streaming service subscribers and crack down on password sharing to improve user engagement and reduce churn.
Disney recorded $2.65 billion in one-time charges and impairments, dragging the company to a rare quarterly net loss. This was largely attributed to “content impairments” related to pulling content off its streaming platforms and ending third-party licensing agreements.
Meanwhile, Iger has hinted that Disney’s TV networks, excluding ESPN — which has been searching for strategic partners and on Tuesday announced a sportsbook partnership with Penn Entertainment — “may not be core” to the business anymore. Separately, Iger is looking to take full control of Hulu, which Disney shares ownership of with Comcast.
“Moving forward, I believe three businesses will drive the greatest growth and value creation over the next five years. They are our film studios, our parks business and streaming, all of which are inextricably linked to our brands and franchises,” said Iger.
However, Disney has seen some recent disappointments at the box office and in the writers’ and actors’ strikes. Iger noted that the company would be looking to improve the quality of its studio films as well as reduce the number of released titles and the cost per title.
Commentators say Disney’s new prices could help drive profitability for the business, but also warn they won’t be without its drawbacks.
“Disney will have to cut prices from current levels in an effort to stimulate demand and defend its market share in an increasingly competitive industry,” said Jesse Cohen, senior analyst at Investing.com.
Meanwhile, investors appear bullish on Disney’s prospects, sending the company’s stock up nearly 3% in after-hours trading. Jessica Reif Ehrlich, a BofA Securities analyst, said: “Bob Iger will lead Disney through this difficult time.”