Why Disney+ is raising the subscription price

Now that Bob Iger has retaken the reins at Disney, one of his top priorities will likely be to turn around the company’s streaming business, which includes Disney+, ESPN+ and majority ownership of Hulu. In recent years, Disney has spent heavily on original content to grow its subscriber base and compete in a crowded streaming market. But the business keeps losing more and more money, and investors are getting impatient.

It’s a whole new world for streaming these days, said Charles Schreger, a marketing professor at New York University and a former HBO executive. After years of chasing growth at all costs, the industry is facing a sobering reality.

“Streaming is a terrible business,” he said.

Streamers are in a bind, Schreger said. They can’t count on more subscribers in an already saturated market, but they also can’t afford to remove expensive content because the competition is fierce.

“The consumer is getting used to being able to switch between service and service,” he said. “All you have to do is press a button and unsubscribe.”

Keeping consumers engaged with new content is especially important to Disney, said Michael Pachter, an analyst at Wedbush Securities.

“They have the other competing concern of creating content on Disney+ that has value beyond Disney+,” he said.

Content that drives business to theatrical releases, theme parks and merchandising, for example. So if cutting costs isn’t a good path to profit, the quickest fix is ​​to raise prices, Pachter said.

What Disney is doing. Starting December 8, the cost of Disney+ will increase from $7.99 to $10.99 per month, if you want the ad-free service. Like Netflix, Disney is implementing a lower-priced ad-supported tier.

“I’m sure it will be welcomed by advertisers who are thirsty to infect whatever kind of entertainment people enjoy,” said Ross Benes, an analyst at Insider Intelligence.

This trend of higher prices or more ads, you know, the stuff that cord-cutters were trying to get away from, well, it’s here to stay, according to Benes.

“Streaming will only get worse for consumers. The best days are behind us,” she said. “And that’s because everyone has to make money.”

That’s not exactly a fairy tale ending.

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