Disney to boost prices for ad-free Disney+, Hulu streaming services

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LOS ANGELES, Aug 13, (AP): Walt Disney Co. CEO Bob Iger vowed to make its streaming services profitable via a planned October price hike on its ad-free Disney+ and Hulu plans and a crackdown on password sharing expected to extend through next year. The increases will raise the monthly cost of ad-free Disney+ by $3, or roughly 27%, to almost $14. The cost of ad-free Hulu will likewise rise $3 to almost $18 – a 20% hike that will make it more expensive than the most popular ad-free tier at Netflix.

Iger spoke following Disney’s release of mixed earnings for its fiscal third quarter ended July 1. The company reported a substantial net loss while shedding customers in both domestic and international markets. Overall, Disney reported a 4% increase in revenue for the quarter but swung to a net loss of $460 million from a year-earlier profit of $1.4 billion. Disney shares, which closed at $87.49, rose roughly 2.2% to $89.45 in after-hours trading. While Disney reported narrower losses on Disney+ in the quarter, the service lost domestic subscribers in the U.S. and Canada for the second straight quarter. Internationally, it racked up its third straight quarter of declines, although issues in the Indian market played a large role there.

The service had 146.1 million international customers in its third quarter, a 7.4% decline from the 157.8 million it reported in the second quarter. That followed a loss of 4 million streaming subscribers in the second quarter. Domestically, it shed 300,000 subscribers in the third quarter, the same number it lost in the second quarter. The Disney CEO acknowledged that the price hikes are intended to steer consumers toward cheaper ad-supported versions of these services, whose subscription prices are not changing.

The advertising market for streaming is “picking up,” he said, noting that it’s healthier than traditional TV ads. “We’re obviously trying with our pricing strategy to migrate more subs to the advertising supported tier.”Benefits Iger didn’t provide details about the password-sharing crackdown beyond saying that Disney could reap some benefits in 2024, although he added that the work “might not be completed” that year and that Disney couldn’t predict how many password sharers would switch to paid subscriptions.

Some analysts doubted whether price hikes and getting tough on password sharers can do much to lead Disney back to sustainable growth. Paul Verna, an analyst with Insider Intelligence, said in a note that the company’s moves aren’t likely to calm investors “anxious for clarity on the company’s strategy for its streaming services and TV networks.” While a narrowing in Disney’s streaming losses is heartening, he argued, the improvements owed more to dramatic cost-cutting than organic growth, suggesting that Iger still doesn’t have a plan for putting Disney on a sound footing. Disney is in the middle of a “ strategic reorganization that includes cutting about 7,000 jobs to help save $5.5 billion across the company. Iger, who returned in November to take over the CEO post from Bob Chapek, has worked over the past several months to turn around Disney’s streaming business while making sure that the financial might of its theme parks doesn’t waver.

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