Yesterday, The Walt Disney company announced it will soon raise prices for Disney+, Hulu, and ESPN+. Today, it revealed that its streaming business has become profitable for the first time.
So if Disney is starting to make money, why has it decided to jack up prices …again?
Disney says it has “earned” higher prices
On October 17, pricing for ad and ad-free subscriptions to Disney+, Hulu, and ESPN+ will increase by as much as 25 percent, depending on the plan (you can see a breakdown of pricing changes here). The pending price hikes follow price increases for the platforms issued in October 2023 and August 2022.
During Disney’s Q3 2024 earnings call today, CFO Hugh Johnston (per a Motley Fool-provided transcription) said that Disney’s earned the right to charge more for streaming services, pointing to current and upcoming content availability:
We do feel like we’ve earned that pricing in the marketplace, and we feel positively about that. With that will come scale benefits. The product improvements also should reduce churn and keep our consumers with us as they’re evaluating their options.
CEO Bob Iger said that Disney has increased its streaming “pricing leverage” with upcoming features like new live channels and movies.
As Disney, like other streaming businesses, looks to shift focus from growing subscriber counts to other factors, like user engagement—or how much time users spend on the service, which can help companies’ ad businesses—and profit margins, it may be more emboldened to make moves that could potentially cost it some subscribers (more on this in a moment).
When asked about customer pushback on the latest price hikes, Iger said in part:
We’re not concerned. The goal is to grow engagement on the platform. And what I mean by that is obviously offering a wider variety of programming.
Disney says it hasn’t lost many customers from previous price hikes
Although price hikes across streaming platforms have driven subscribers to the web to declare cancellation plans and encourage others to cancel, Iger claimed that “every time we’ve taken a price increase, we’ve had only modest churn from that, nothing that we would consider significant.”
One of the biggest business challenges facing streaming companies currently is high churn rates. But it seems like other reasons for fast churning—such as subscribers watching preferred content and then canceling until the platform adds new, desirable stuff to watch—may be more pressing to Disney than frequent price hikes—which have become common among streaming services.
Iger also claimed that Disney hadn’t seen a significant backlash to the password-sharing crackdown that the company began rolling out earlier this year and will continue “in earnest” in September.