Disney+ just got more expensive. Unless you’re willing to watch ads.
The new ad-supported Disney+ subscription tier will debut in the United States on December 8 for $7.99 per month, the company announced on Wednesday. If this price sounds familiar, it should. This is what consumers are paying for Disney+ right now without the ads.
The ad-free premium Disney+ tier will now increase from $3 to $10.99 per month, the biggest price increase for the channel since its debut in November 2019. It increased prices by $1 in March 2021.
Disney+’s price increase comes as the service had a strong quarter. The service landed 14.4 million subscribers in the third quarter, beating Wall Street expectations. The service currently has 152.1 million subscribers.
The results sent the shares up as much as 6.5% in after-hours trading.
Looking at the company’s overall earnings, Disney (DIS) reported second-quarter revenue of $21.5 billion, up 26% from a year ago, and reported a net income 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 forecast, which was for 230 million to 260 million subscribers by the end of fiscal year 2024. On Wednesday, it provided a new guidance of 135 million to 165 million subscribers for its main product Disney+, and as much as 80 million for its Disney+ Hotstar service in India.
“We had an excellent quarter, with our world-class creative and commercial teams driving outstanding performances at our domestic theme parks, strong live sports viewership growth and significant subscriber growth to our services. streaming,” said Bob Chapek, CEO of Disney. in the company’s letter to investors on Wednesday.
Disney+ isn’t the only Disney streaming service whose price is going up.
Hulu, which is majority-owned by Disney, will also get a price increase, ranging from $1 to $7.99 for its ad-supported tier and $2 to $14.99 for Hulu without ads.
One plan that doesn’t get a price hike is the premium Disney Bundle, which ties the company’s streaming offerings from Disney+ and ad-free Hulu alongside ESPN+. Its cost remains $19.99.
The move appears to be Disney’s way of pushing consumers to sign up for its entire suite of services rather than just one. And from a pricing perspective, it’s hard to say no to a three-service package that only costs $9 more per month than Disney’s biggest service.
Disney (DIS) also introduces two new bundle plans: one is Disney (DIS)+ and Hulu with ads for $9.99; the other is the three services with ads for $12.99.
Linking streaming services seems to be a new priority for media companies.
Take Warner Bros. Discovery, for example. CNN’s parent company announced last week that it will combine its two streaming services, HBO Max and Discovery+, next summer.
If the first phase of the streaming revolution, which began around 2017, was the “streaming war”, the next phase could be considered the “Rumble of the Bundles”.
So why is your streaming wallet about to take another hit? This is because building a successful streaming service is really, really expensive.
Services like Disney+ spend millions, if not billions, of dollars creating new content that attracts old and new subscribers as well as the expensive infrastructure that keeps it all together. Exhibit A: Disney’s loss in its direct-to-consumer unit was $1.06 billion in the third quarter, about four times what it was a year ago.
The continued growth also showed signs of maturity, i.e. slower growth. Netflix (NFLX), the king of streaming, has lost subscribers for two quarters in a row this year.
Across the industry, attracting new subscribers has become more difficult and if subscriptions are slowing down, revenue has to come from somewhere. Raising prices is a simple way to achieve this.
And Disney can get away with that kind of price increase given the breadth of its 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 also offers feature films from 20th century studios and shows from FX, among other trending content.
Kareem Daniel, president of Disney Media & Entertainment Distribution, said in a statement Wednesday that the new ad-supported offering along with the company’s new lineup of streaming plans “will provide consumers with greater choice at a variety of price points. to meet the diverse needs of our viewers and attract an even wider audience.
Disney’s strong third quarter wasn’t just thanks to Disney+.
The company’s parks, experiences and products unit had a very strong quarter, generating revenue of $7.3 billion, up 70% from the same quarter last year.
Disney said this was the result of “increased attendance, busy nights and cruises.”
“Our national parks and resorts were open throughout the current quarter, while Disneyland Resort was open 65 days in the prior year quarter, and Walt Disney World Resort was operating at reduced capacity in the 2019 quarter. previous year,” the company said.