Disney+ Hikes Prices as Sales Sink Across the Company
The Walt Disney Company is set to increase the prices for its Disney+ streaming service yet again, following a challenging third-quarter earnings report marked by revenue difficulties across various sectors except international parks.
Effective October 12, the ad-free subscription for the streaming service will rise to $13.99 per month, reflecting a $3 monthly increase. This marks the second price hike within a year, with the previous increase in December seeing the ad-free tier cost raised from $7.99 to $10.99.
In conjunction with this, Hulu, of which Disney owns a majority stake, will also experience price surges in October. The ad-free offering from Hulu will climb by $3 to $17.99. For consumers interested in a combined ad-free package of Disney+ and Hulu, the new price point will be $19.99.
However, the latest round of price hikes spares the ad-supported subscription tier of Disney+, maintaining its $7.99 per month cost.
During Disney’s third-quarter earnings call, CEO Bob Iger revealed that these pricing decisions were motivated by the intention to drive more Disney+ subscribers towards the service’s ad-supported alternative.
Iger noted, “The advertising marketplace for streaming is picking up. It’s more healthy than the advertising marketplace for linear television.”
Despite these changes, Disney reported that its streaming business remains unprofitable, though the third quarter did show some reduction in revenue loss.
In terms of subscribers, there has been a pullback in the US and Canada. Disney noted a 1% decline in domestic subscribers for two consecutive quarters, with international subscribers growing by 2% during the same period.
Iger also hinted at Disney+’s consideration of addressing password sharing, a strategy that contributed to Netflix gaining millions of new subscribers. Iger mentioned, “In calendar ’24, we’re going to get at this issue. We certainly have established this as a real priority. We actually think that there’s an opportunity here to help us grow our business.”
Concerns Surround Disney’s Linear Business
The overall revenue from Disney’s third quarter fell slightly below expectations, standing at $22.3 billion, compared to estimated revenue of $22.5 billion, as per Refinitiv estimates. Notably, linear television revenue continued to decline, showing a 7% drop compared to the same quarter in the previous year.
Addressing the future of Disney’s linear assets, which include ABC, the Disney Channel, FX, and National Geographic, Iger commented, “While linear remains highly profitable for Disney today, the trends being fueled by cord-cutting are unmistakable. As I’ve stated before, we’re thinking expansively and considering a variety of strategic options.”
Disney’s Bright Spot: Parks
Despite challenges, Disney’s parks division emerged as a positive aspect in its earnings. The revenue from Disney parks, experiences, and products witnessed a 13% increase to $8.3 billion, attributed to growth in international parks like Shanghai Disney Resort and Hong Kong Disneyland Resort.
While the division’s growth was somewhat countered by reduced revenue at US-based domestic parks, it remained a positive highlight. The growth at Shanghai Disney Resort can be attributed to the park’s operation throughout the entire current quarter, compared to only three days in the same quarter the previous year, due to pandemic-related closures.
Iger on Hollywood Strikes
Iger addressed the ongoing writers’ and actors’ strikes in Hollywood, acknowledging the impact of their actions on the creative community. He expressed his commitment to working towards resolving the issues that have caused disruption in recent months.
