Disney, the entertainment giant, announced a significant increase in its streaming prices for its ad-free tiers of Disney+ and Hulu on Wednesday, as part of its strategy to boost revenue and challenge Netflix in the streaming market. The company also revealed plans to crack down on password sharing among its subscribers, which could generate more revenue from its existing user base.
Disney’s Streaming Price Hikes
Starting from November 1, 2023, Disney will raise the monthly price of its ad-free Disney+ service from $11.99 to $14.99, a 25% increase. The annual price will also go up from $119.99 to $149.99, a 20% increase. The ad-free Hulu service will see a similar hike, from $11.99 to $14.99 per month, a 27% increase.
The price hikes will only affect the ad-free tiers of Disney’s streaming services, while the ad-supported tiers will remain unchanged at $7.99 per month for Disney+ and $5.99 per month for Hulu. Disney also offers a bundle of Disney+, Hulu, and ESPN+ for $13.99 per month, which will not be affected by the price changes.
Disney’s CEO Bob Iger said on the company’s earnings call that the price hikes reflect the value of the company’s streaming content, which includes popular franchises such as Marvel, Star Wars, Pixar, and National Geographic. He also said that the company is investing heavily in original content for its streaming platforms, with more than 100 new titles planned for the next year.
Iger also hinted that the company is considering a strategic partner for its sports streaming service ESPN+, which has been struggling to attract and retain subscribers amid rising sports rights costs and declining cable TV viewership.
Disney’s Password Sharing Crackdown
Another move that Disney announced on Wednesday was its plan to start cracking down on password sharing among its streaming subscribers. Password sharing is a common practice among streaming users, who share their login credentials with friends or family members to access the same service without paying extra.
According to a survey by Magid Research, about 33% of streaming users share their passwords with others, and about 9% of streaming users only use shared passwords without paying for any service. This means that streaming companies are losing potential revenue from these users who are accessing their content for free or at a lower cost.
Disney said that it will implement a new technology that will detect and prevent password sharing among its streaming subscribers starting from early 2024. The company did not provide details on how the technology will work, but said that it will be fair and reasonable to its customers.
Iger said that password sharing is a “significant issue” for the streaming industry, and that Disney wants to “protect the integrity” of its services and “ensure that people are paying a fair price” for them. He also said that password sharing is “not in the best interest” of Disney’s shareholders, who expect the company to generate more revenue from its streaming business.
Disney’s Streaming Challenges
Disney’s latest moves come as the company faces several challenges in its streaming business, which has been seen as its main growth driver amid the pandemic-induced slowdown in its other segments such as theme parks, movies, and merchandise.
Disney’s streaming business has grown rapidly since it launched Disney+ in November 2019, reaching more than 200 million subscribers across its three services by June 2023. However, the growth has slowed down in recent quarters, as the company faced increased competition from other streaming players such as Netflix, Amazon Prime Video, HBO Max, and Peacock.
Netflix, in particular, has been a formidable rival for Disney in the streaming market, as it has been expanding its global presence and investing heavily in original content across various genres and languages. Netflix has also been making similar moves as Disney in terms of raising its prices and cracking down on password sharing.
Netflix raised its prices for its standard and premium plans in October 2022 by $1 and $2 respectively, bringing them to $14.99 and $18.99 per month. The company also started testing a new feature that requires users to verify their identity with a code sent to their email or phone number if they log in from a new device or location.
Netflix said that these moves were aimed at improving its service quality and delivering more value to its customers. The company also said that it was confident that its customers would stick with its service despite the price hikes and password verification measures.
Netflix’s confidence seems to be justified by its strong performance in the third quarter of 2023, when it added 8.5 million subscribers globally, beating analysts’ expectations and bringing its total subscriber base to 241 million. The company also reported revenue of $8.8 billion and earnings per share of $2.97, both surpassing Wall Street estimates.
Netflix’s CEO Reed Hastings said on the company’s earnings call that Netflix was “very happy” with its growth and profitability, and that it was “not worried” about Disney’s price hikes and password sharing crackdown. He also said that Netflix was “very excited” about its content pipeline, which includes new seasons of hit shows such as Stranger Things, The Witcher, and The Crown, as well as new movies and documentaries.
Disney’s Streaming Outlook
Disney’s streaming price hikes and password sharing crackdown are expected to have a positive impact on the company’s revenue and earnings in the long run, as they will increase the average revenue per user (ARPU) and reduce the customer acquisition cost (CAC) for its streaming services.
According to analysts at MoffettNathanson, Disney’s streaming ARPU could increase by 18% in fiscal 2024 as a result of the price hikes, while its streaming CAC could decrease by 11% as a result of the password sharing crackdown. The analysts also estimated that Disney’s streaming revenue could grow by 28% to $32.6 billion in fiscal 2024, while its streaming operating income could improve by 65% to $3.9 billion.
However, Disney’s streaming price hikes and password sharing crackdown could also have some negative consequences for the company, such as losing some customers who are sensitive to price changes or who rely on password sharing to access its services. The company could also face some backlash from its loyal fans who may feel betrayed or disappointed by its moves.
Disney’s streaming outlook also depends on how well it can compete with Netflix and other streaming rivals in terms of content quality, quantity, and diversity. Disney has a strong advantage in terms of its iconic brands and franchises, but it also needs to innovate and diversify its content offerings to appeal to a wider and more diverse audience.
Disney’s streaming future also hinges on how well it can manage its legacy TV and movie businesses, which are undergoing major transformations due to the shift to streaming and the impact of the pandemic. Disney has been experimenting with different release strategies for its movies, such as releasing them simultaneously on theaters and streaming platforms, or skipping theaters altogether and going straight to streaming.
Disney has also been restructuring its TV business, which includes ABC, ESPN, FX, and National Geographic, to focus more on streaming and direct-to-consumer distribution. The company has been consolidating its TV studios and networks, cutting costs, and laying off staff.
Disney’s CEO Bob Iger said that he is confident that Disney can overcome its challenges and succeed in its streaming endeavors. He said that he is committed to leading the company through this “critical transition period” until he retires in 2026. He also said that he is optimistic about Disney’s future prospects, as it has a “tremendous opportunity” to leverage its “unmatched portfolio of brands and franchises” to create “compelling and engaging” content for its global audience.