Why Disney+ is increasing its subscription price

Now that Bob Iger has regained the reins at Disney, one of his top priorities will likely be a turnaround in the company’s streaming business, which includes Disney+, ESPN+, and its majority stake in 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 company is losing more and more money, and investors are getting impatient.

It’s a whole new world for streaming these days, said Charles Schreger, a New York University marketing professor and former HBO exec. After years of striving for growth at any cost, the industry faces 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 neither can they afford to withdraw expensive content because of stiff competition.

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

Engaging consumers with new content is especially important for 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 pushes the business towards theatrical releases, theme parks and merchandising, for example. So if cutting costs isn’t a good way to turn a profit, the quicker fix is ​​to raise prices, Pachter said.

What Disney is doing. Beginning December 8, Disney+ will increase its cost from $7.99 to $10.99 per month if you want the service without ads. Like Netflix, Disney is introducing a more affordable ad-supported tier.

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

This trend toward higher prices or more advertising — you know, the stuff cord cutters have been trying to escape — is here to stay, according to Benes.

“Streaming is only going to get worse for consumers. The best days are behind us,” he said. “And that’s because everybody has to make money.”

This isn’t exactly a fairy tale ending.

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