It was a bad news day all around for Disney on Wednesday.
The media giant posted fiscal second-quarter results that, while overall decent, saw continued losses for its direct-to-consumer (aka, streaming) business. The streaming services, which include Disney+, Hulu and ESPN, posted an operating loss of more than half a billion dollars. The results came with subscriber losses across a few of its services.
But Disney saved the biggest blow for us: price hikes across the board for its various services. Disney+ Premium goes up by $3 to $13.99 a month. Hulu without ads will also increase by $3 to $17.99. ESPN+ rises by $1 to $10.99 a month. It’s also going to crack down on password sharing next year.
Hulu with Live TV with ads will cost $76.99 a month, while the version with no ads will cost $89.99 each month. Both new prices represent an increase of $7 a month.
It’s the second price hike in less than a year after Disney introduced the cheaper ad-supported option in December.
Disney isn’t the only one to increase prices – YouTube TV did it back in March, and Netflix had a few increases in recent years – it comes at a poor time for its flagship Disney+. The service has been on a downward trend for the last two quarters and after a few high-profile flops in programming, enthusiasm for the service has waned. All of that may have consumers rethinking whether they can justify the higher price.
This price hike is also coming as more consumers are embracing free ad-supported services such as Pluto, Tubi and more. The explosion of different services – streaming and otherwise – have consumers dealing with subscription fatigue. Combine that with rampant inflation and a higher cost of living, and it’s easy to see how a price hike could put Disney+ on the chopping block in many households.
Disney+ was one of the first services to truly explode during the start of the streaming wars in late 2019. The catalog of family-friendly classic films and marquee shows based on beloved franchises like Star Wars and the Marvel Cinematic Universe made it a no-brainer for any geek or family. The rise of The Mandalorian and zeitgeist-breaking Baby Yoda further cemented its momentum.
“We came out of the gate quickly, and leaned into a spending level to fuel subscriber growth,” Disney Bob Iger said on the company’s fiscal third-quarter conference call on Wednesday.
Early MCU efforts like Wandavision and The Falcon and the Winter Soldier also managed to capture the interest of audiences. The pandemic, meanwhile, forced all of us inside and limited our outdoor options, making the idea of streaming services a lot more attractive.
Fast forward three years, and things have changed dramatically.
Society has gone back to normal, which means fewer hours inside watching content. There are also A LOT more streaming options, from MAX to Peacock to Paramount Plus, not to mention older stalwarts like Netflix and Amazon Prime Video. On top of those services are the ad-based options from Pluto, Tubi, Roku and more.
Disney+ is no longer a novelty, and it’s increasingly finding it difficult to stand out from the pack.
You can see it in the numbers. Disney+’s US and Canada business lost 300,000 subscribers in the third quarter, having lost the same amount in the prior period. Disney executives touted the overall Disney+ numbers, which includes 1.1 million new international customers, as a win for the quarter.
More Misses Than Hits
While Netflix has an overwhelming library of original programming and Prime and Hulu have a large back catalog of older shows and movies, Disney+ is more driven by current hits. It has a library of Disney and Fox content, but most of the buzz and reason you stick with Disney+ are for the high-profile shows like The Mandolorian.
Even here, the quality of shows have fallen. The third season of The Mandalorian was an uneven mess, with critics saying it felt more like a placeholder for more interesting future stories. The Book of Boba Fett, despite arriving with a lot of hype and expectations, was a massive disappointment. The critically acclaimed and more mature Andor, ironically, was ignored by huge swaths of Star Wars fandom.
The tepid reaction to Star Wars pales in comparison to the absolute fan hate that Marvel’s Secret Invasion garnered. Secret Invasion received a 54% critics rating on Rotten Tomatoes, by far the worst of the MCU shows. Fans gave it an even worse 51% rating.
While one show won’t dictate someone’s purchasing decision, it’s awful timing that news of these price hikes come with Secret Invasion being the last to leave a taste in your mouth.
There’s still time for Disney to turn things around. Buzzy shows such as Ahsoka and the second season of critically lauded Loki are right around the corner. Disney is still projecting confidence about the business.
“We’ve reset the whole business around economics designed to deliver sustained profitability,” Iger said on the call.
Disney’s likely hoping consumers don’t hit reset on spending for Disney+.