Yesterday, the Walt Disney Company announced that it will soon increase the prices for Disney+, Hulu and ESPN+. Today, It announced that its streaming business had become profitable for the first time.
So if Disney is starting to make money, why did it decide to raise prices…again?
Disney says it “deserves” higher prices
On October 17, prices for ad- and ad-free subscriptions to Disney+, Hulu and ESPN+ will increase by up to 25 percent, depending on the plan (see a breakdown of the price changes here). The upcoming price increases follow price increases for the platforms issued in October 2023 and August 2022.
During Disney’s third-quarter 2024 earnings call today, CFO Hugh Johnston said (according to a transcript provided by Motley Fool) that Disney has earned the right to charge more for streaming services, citing current and future content availability:
We believe we have earned these prices in the market and that makes us feel good. With that comes economies of scale. The product improvements should also reduce customer churn and keep our customers with us while they consider their options.
CEO Bob Iger said Disney has increased its “pricing power” in streaming with upcoming features such as new live channels and movies.
As Disney, like other streaming companies, looks to shift its focus from subscriber count to other factors, such as user engagement—how much time users spend on the service, which can benefit the companies’ advertising business—and profit margins, the company may be more encouraged to take steps that could potentially cost it some subscribers (more on that in a moment).
When asked about customer resistance to recent price increases, Iger said, among other things:
We are not concerned. The goal is to increase engagement on the platform. And what I mean by that is, of course, to offer a greater variety of programming.
Disney says it has not lost many customers due to previous price increases
Although the price increases on streaming platforms have caused internet subscribers to want to cancel their subscriptions and encouraged others to terminate their contracts, Iger claimed, “Every time we’ve made a price increase, there’s only been a modest fluctuation, nothing we would call significant.”
One of the biggest business challenges streaming companies are currently facing is high churn rates. But it seems that other reasons for high churn – such as subscribers watching their favorite content and then canceling until the platform adds new, interesting content – may be more pressing for Disney than frequent price increases that have become commonplace among streaming services.
Iger also claimed that there had been no significant response from Disney to the crackdown on password sharing that the company launched earlier this year and will resume “in earnest” in September.
