Disney+’s new ad-supported subscription tier will debut in the U.S. on Dec. 8 for $7.99 a month, the company announced Wednesday. If this price point looks familiar, it should. This is what users pay for Disney+ right now without the ads.
Disney+’s price hike comes as the service had a great quarter. The service saw 14.4 million subscribers in the third quarter, beating Wall Street expectations. The service currently has 152.1 million subscribers.
The results sent shares up as much as 6.5% in after-market trading.
As for the company’s overall earnings, Disney ( DIS ) posted second-quarter revenue of $21.5 billion, up 26% from last year, and reported net income of $1.4 billion, up 53% more than a year ago.
Disney noted that it has 221 million subscribers across its multiple streaming offerings. Netflix has 220.6 million.
Disney also revised its long-term forecasts to 230 million to 260 million subscribers by the end of fiscal 2024. On Wednesday, it provided new guidance of 135 million to 165 million subscribers for its core Disney+ product and as many as 80 million for its Disney+ Hotstar service in India.
“We had an excellent quarter, with our world-class creative and business teams delivering exceptional performance at our local theme parks, large increases in live sports viewership and significant subscriber growth across our streaming services,” said Bob Chapek, CEO of Disney in the company’s letter to investors on Wednesday.
Why Disney+ is getting more expensive
Disney+ isn’t the only Disney streaming service to go up in price.
Hulu, which is majority owned by Disney, will also see a price jump, up $1 to $7.99 for the ad-supported tier and $2 to $14.99 for ad-free Hulu.
One plan that isn’t getting a price increase is Disney’s premium package, which bundles the company’s ad-free Disney+ and Hulu streaming offerings together with ESPN+. Its price remains $19.99.
The move appears to be Disney’s way of getting users to sign up for the entire set of services, not just one. And from a pricing perspective, it’s hard to say no to a package that has three services that are only $9 more per month than Disney’s biggest service.
Disney ( DIS ) is also introducing two new bundle plans: One is Disney+ and Hulu with ads for $9.99; the other is all three services with ads for $12.99.
The bundling of streaming services seems to be a new focus for media companies.
Take, for example, Warner Bros. Discovery. CNN’s parent company announced last week that it will combine its two streaming services, HBO Max and Discovery+, next summer.
If the first phase of the streaming revolution that started around 2017 was the “Streaming Wars”, the next phase can be considered the “Rumble of the Bundles”.
So why is your streaming pocketbook about to take another hit? That’s because building successful streaming services is really, really expensive.
Services like Disney+ spend millions of dollars, if not billions, to create fresh content that appeals to old and new subscribers, as well as the expensive infrastructure to keep it all together. Exhibit A: Disney’s loss in its direct-to-consumer unit was $1.06 billion in the third quarter — roughly four times the year ago.
Stream growth also shows signs of maturity, ie. slower growth. Netflix ( NFLX ), the king of streaming, has lost subscribers for two straight quarters this year.
Across the industry, attracting new subscribers has become more difficult, and if subscriptions are slowing down, revenue has to come from somewhere. Raising prices is an easy way to do this.
And Disney can get away with this type of price increase given the breadth of their library.
Disney+ is home to some of the most popular brands in all of entertainment, including Marvel Studios, Pixar, Disney Animation and Star Wars. Hulu also has feature films from 20th Century Studios and shows from FX, among other buzzy content.
Kareem Daniel, president of Disney Media & Entertainment Distribution, said in a statement Wednesday that the new ad-supported offering, as well as the company’s new lineup of streaming plans, will “provide more choices for consumers at different price points to cater to the diverse needs of our viewers and appeal to an even wider audience.”
More than just streaming
Disney’s strong third quarter wasn’t just on the back of Disney+.
The company’s Parks, Experiences and Products division had a very strong quarter, bringing in $7.3 billion in revenue, up 70% from the same quarter last year.
Disney said this was the result of “increased attendance, overnight stays and cruise ship sailings.”
“Our domestic parks and resorts were open for the entire current quarter, while Disneyland Resort was open for 65 days of the prior-year quarter and Walt Disney World Resort was operating at reduced capacity in the prior-year quarter,” the company said.
Add Comment