Disney+, a new ad-supported subscription tier, will debut in the US on December 8 for $7.99 a month, the company announced Wednesday. If that price sounds familiar, it should. Right now consumers are paying for Disney+ without The Advertisements.
Disney+’s price hike comes as the service had a good quarter. The service added 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 6.5% in after-hours trading.
As for the company’s overall earnings, Disney ( DIS ) posted revenue of $21.5 billion in the second quarter, up 26% from last year, and reported a net profit of $1.4 billion, up 53% from 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 flagship Disney+ product. 80 million for Disney+ Hotstar service in India.
“We had an outstanding quarter with our world-class creative and business teams delivering outstanding performances at our domestic theme parks, large increases in live-sports viewership and significant subscriber growth on our streaming services,” said Disney CEO Bob Chapek. In the company’s letter to investors on Wednesday.
Why is Disney+ going up in price?
Disney+ isn’t the only Disney streaming service that’s going up in price.
Hulu, which is majority owned by Disney, will receive a price increase of $1 to $7.99 for its ad-supported tier and $2 to $14.99 for Hulu without any ads.
One plan that won’t get a price hike is the Premium Disney Bundle, which bundles the company’s streaming offerings from Disney+ and Hulu with no ads along with ESPN+. It remains priced at $19.99.
The move is Disney’s way of pushing customers to sign up for all of its services rather than just one. And from a pricing perspective, it’s hard to say no to a bundle with three services for just $9 more per month than Disney’s biggest service.
Linking streaming services together is a new focus for media companies.
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 taking another hit? Because building successful streaming services is really expensive.
Services like Disney+ spend millions of dollars, if not billions, creating fresh content that appeals to old and new subscribers, and expensive infrastructure to hold 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 a year earlier.
Across the industry, attracting new subscribers is difficult, and revenue has to come from somewhere if subscriptions are slow. Raising prices is an easy way to do that.
And Disney can get away with this kind of price hike considering 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 has movies from 20th Century Studios and shows from FX, among other buzzy content.
Kareem Daniel, president of Disney media and entertainment distribution, said in a statement Wednesday that the new ad-supported offerings and the company’s new streaming plans “provide more consumer choice at different price points. Our viewers’ diverse needs and appeal to an even broader 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 unit 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 “increases in attendance, occupied room nights 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 operated at reduced capacity during the prior-year quarter,” the company said.