Disney (DIS) announced on Wednesday that it will increase the prices of its ad-free streaming services Disney+ and Hulu for the second time this year, as the company tries to reduce its direct-to-consumer losses and reach profitability by the end of fiscal 2024. The price hikes come amid a fierce competition in the streaming market, as well as a growing problem of password sharing among users.
Disney+ to cost $13.99 a month in the US
Starting from October 12, the monthly price of the ad-free Disney+ plan will rise by 27% to $13.99 in the US, up from $10.99. This is double the $6.99 monthly cost that Disney charged for the service when it launched in 2019. The ad-supported tier of Disney+ will remain at $7.99 a month.
Disney+ is the flagship streaming service of the media giant, offering a vast library of content from its brands such as Marvel, Star Wars, Pixar, and National Geographic. It also features original shows and movies such as The Mandalorian, WandaVision, Loki, and Black Widow.
Disney+ has been one of the fastest-growing streaming services in the world, reaching over 146 million subscribers as of June 2021. However, it also saw its biggest-ever subscriber decline in the third quarter, losing 11.7 million customers, mainly due to the loss of rights to a popular cricket league in India.
Hulu to charge $17.99 a month for ad-free plan
Hulu, another streaming service owned by Disney, will also raise its prices for its ad-free plan by $3 a month, or 20%, to $17.99 a month. The ad-supported plan will stay at $7.99 a month.
Hulu offers a mix of original and licensed content, including shows like The Handmaid’s Tale, Little Fires Everywhere, and The Great. It also has a live TV option that allows users to watch channels such as ABC, ESPN, and Fox.
Hulu had 42.8 million subscribers as of June 2021, up from 39.4 million in March. However, it also reported lower average revenue per user (ARPU) due to promotions and discounts.
Disney to launch new bundle and crack down on password sharing
In addition to the price increases, Disney also announced that it will launch a new bundle option for US subscribers on September 6. The bundle will include the ad-free versions of Disney+ and Hulu for $19.99 a month, saving users $2 a month compared to subscribing separately.
Disney already offers a bundle that includes Disney+, Hulu with ads, and ESPN+ for $13.99 a month. ESPN+ is a sports streaming service that features live events, original shows, and documentaries.
Disney CEO Bob Iger also said that he will address the issue of password sharing next year, echoing Netflix (NFLX), which has been testing ways to limit unauthorized account sharing. Password sharing is a common practice among streaming users, who share their login credentials with friends or family members to access content without paying extra fees.
According to a survey by Magid Research, 33% of US streaming users share their passwords with someone outside their household. This could result in billions of dollars in lost revenue for streaming companies.
Iger said that password sharing is “not something we’re overly concerned about right now”, but added that “we do intend to address it more aggressively as time goes on”. He did not specify what measures Disney will take to prevent password sharing.
Disney aims to narrow streaming losses and compete with rivals
The price hikes and the new bundle are part of Disney’s strategy to improve its streaming business, which has been losing money despite its rapid growth. Disney reported streaming losses of $512 million in its fiscal third quarter, down from $1.1 billion a year ago and less than the $777 million expected by analysts.
Disney expects to reach profitability for its direct-to-consumer segment by the end of fiscal 2024. It also plans to invest more in content production and marketing to attract and retain subscribers.
Disney faces stiff competition from other streaming players such as Netflix, Amazon Prime Video (AMZN), HBO Max (T), Peacock (CMCSA), Paramount+ (VIAC), and Apple TV+ (AAPL). These services have been vying for customers’ attention and wallets by offering exclusive and original content, as well as lower prices or free trials.
According to data from Antenna, Netflix remains the most popular streaming service in the US, followed by Amazon Prime Video and Disney+. However, HBO Max has been gaining momentum since its launch in May 2020, thanks to its slate of blockbuster movies such as Godzilla vs Kong, Mortal Kombat, and The Suicide Squad.
