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Disney Increases Streaming Prices

Disney recently announced significant price increases coming to its streaming services, including flagship Disney+ and Hulu. These changes reflect Disney’s confidence in its content library as well as its push towards profitability in the streaming space after years of big losses. For consumers, it means shelling out more money to keep up with the Magic Kingdom. Disney+ launched in late 2019 with a budget price of just $6.99 per month, undercutting competitors like Netflix. This low cost, paired with Disney’s vast catalog of movies and shows, fueled massive growth. Disney+ reached over 150 million subscribers in just 3 years. However, operating losses also ballooned as Disney poured money into developing original content. For its 2022 fiscal year, losses for Disney’s streaming division totaled nearly $4 billion. With rising costs impacting the whole company, Disney is now pivoting to price hikes for streaming.

Disney+ Jumps 38%

In August 2022, Disney announced that starting December 8th, ad-free Disney+ will jump from $7.99 to $10.99 per month in the United States, a 38% increase. The option with ads will remain $7.99. This brings Disney+ nearly in line with competitors like Netflix ($15.49 for ad-free) and HBO Max ($14.99).Disney is essentially betting that customers find its content valuable enough to accept the higher price. Past behavior suggests many will pay more. In March 2022, a $1 increase to $7.99 caused little subscriber loss. The ad-supported tier also gives budget-conscious fans an option to keep Disney+ for the original price. Disney wants to migrate more viewers to this ad-based version to increase revenue. Advertising spending is not as impacted by economic downturns as subscription fees.

Hulu Price Also Rising

Along with Disney+, Hulu saw a price jump. Hulu without ads will rise from $12.99 to $14.99 per month in October 2022, a 20% increase. Hulu with ads will go from $6.99 to $7.99 per month. This brings ad-supported Hulu to the same $7.99 price point as ad-based Disney+ and ESPN+. The Hulu hike is higher than Disney’s other services. Research shows customers perceive Hulu as more of a necessity than a discretionary entertainment expense. Disney believes this grants Hulu pricing power.

Bundles Adjust Too

Disney also adjusted the pricing on bundled packages incorporating Disney+, Hulu, and sports streaming service ESPN+. These bundles give discounts for combining multiple Disney streaming options. A new basic bundle with Disney+ and Hulu, both with ads, will cost $9.99 per month. This is the cheapest bundled offering and provides substantial savings versus buying both services individually. However, existing subscribers cannot access this basic bundle. For current customers, the bundle with Disney+ no ads, Hulu with ads, and ESPN+ with ads will increase by $1 to $14.99 per month. A premium bundle with no ads on Disney+ and Hulu, plus ESPN+ with ads, will be $19.99 monthly.

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Revenue Over Subscribers

The price increases indicate Disney prioritizes revenue growth over subscriber numbers in its streaming business. Raising prices risks some customers canceling services, but Disney appears comfortable with that trade-off. Its confidence comes from two factors. First, Disney+ and Hulu have extensive libraries of content and original programming, shoring up perceived value. Second, Disney’s strong brand loyalty means its fans are less likely to quit compared to other services. While some subscriber loss is expected, Disney forecasts it will be modest enough to drive significant revenue gains from the higher prices. In other words, less subscribers but more money per subscriber.

Competitive Pressure

These changes come at a time of increased competition in the streaming industry. Deep-pocketed rivals like Apple, Amazon, and Paramount are pouring billions into content to take on incumbents Netflix, Hulu, and HBO Max. Disney is strategically leveraging its brand strength and content depth now to extract higher prices before competition potentially erodes that pricing power. Once viewers have more streaming options vying for their dollars, it becomes harder to raise prices.

Outlook for Consumers

The Disney streaming price increases continue the trend of cord-cutting losing its cost advantage over traditional TV. With most major services now in the $10 to $15 per month range, plus the need for multiple subscriptions, streaming is becoming more expensive for consumers seeking variety. Still, Disney delivers a strong value with its combination of brand appeal, content breadth, and bundling options. For families in particular, Disney+ is likely to remain a staple. But the days of cheap streaming may be over as media giants like Disney push toward profitability. Consumers wanting to save will need to get comfortable with ads.