Recent changes to Disney+'s pricing will close the gap between earnings from subscribers and ad revenue, raising questions about how competitors like Netflix will respond to the plans.
A recent report from The Hollywood Reporter focused on an upcoming price increase for Disney+ subscribers and the launch of the service's ad-supported subscriber tier, which will cost users $7.99 a month. This is the current cost of the no-ads package, but this option will be increasing in price to $10.99 a month. The new prices were revealed on Aug. 10th and are set to be implemented in Dec. 2022.
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The price increase for the current ad-free tier, along with the more expensive than anticipated ad tier, are part of a plan by Disney CEO Bob Chapek to grow Disney+'s profitability by 2024. “We thought that this was the perfect time to go ahead and bring up that price-value equation," Chapek said. "So that we’re more accurately reflecting the value that a guest or a consumer or viewer gets with Disney+."
Chapek confirmed that Disney+ has seen a "strong advertiser demand" which, in addition to the increase in prices, does indicate the company's desire for increased profitability rather than a focus onmaintaining subscribers in the upcoming years. Wells Fargo analyst Steven Cahall explained in a recent interview that “It now looks like Disney+ is tracking towards tightened and trimmed sub guidance, while the ad-supported tier + price increases + content rationalization = a much improved long-term profit outlook."
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This change in focus away from subscribers appears to be rippling across the industry, with Netflix and HBO taking steps to cut costs in the upcoming quarter. Warner Bros. Discovery CEO David Zaslav focused on cost-cutting and promised not to overspend on content. "We’re not in the business of trying to pick up every sub," he explained. "We want to make sure we get paid."
With Disney+ overtaking Netflix in worldwide subscriptions it has officially become the world's largest streaming company. Netflix's prices are already higher than Disney's, which presents a problem for the struggling service. Netflix has announced ad-supported content, but executives have not yet set a price for the service.
Netflix's Chief Operating Officer Greg Peters did hint that Netflix may lower its subscription costs while also implementing the ad-free tier. When asked if Disney's pricing plans impacted the decisions in upcoming changes, a spokesperson explained that there "have been no updates since the second-quarter earnings report in July."
Source: The Hollywood Reporter