Today Disney announced it will take at least $1.5 billion in write-downs associated with its plans to remove content from its streaming services. This comes as Disney is looking to cut back on the amount of content it offers on Disney+, Hulu, and ESPN+ to help cut costs by reducing what it has to pay for its content.
Disney also announced it may also terminate licenses agreements with some partners. This may result in new content not being added.
In the filing, Disney said:
As previously announced, The Walt Disney Company (together with the subsidiaries through which its various businesses are actually conducted, the “Company”) is in the process of reviewing content, primarily on its direct-to-consumer (“DTC”) services, for alignment with a strategic change in approach to content curation and as a result is removing certain content from its platforms. On May 26, 2023, the Company removed certain produced content from its DTC services. As a result, the Company will record a $1.5 billion impairment charge in its fiscal third quarter financial statements to adjust the carrying value of these content assets to fair value. The Company is continuing its review and currently anticipates additional produced content will be removed from its DTC and other platforms, largely during the remainder of its third fiscal quarter. As a result, the Company currently estimates it may incur further impairment charges of up to approximately $0.4 billion related to produced content. The Company does not expect any material cash expenditures in connection with the impairment charges related to produced content. In addition, the Company may terminate certain license agreements for the right to use content on its platforms, which would result in the removal of licensed content from its platforms and lead to impairment and/or contract termination charges as well as cash payments. The Company currently expects that any such charges and payments related to licensed content would be meaningfully less than the impairment charges related to produced content.
Disney has also announced plans to raise the price of some of its streaming services. In March Bob Iger, the CEO of Disney, gave a talk at the 2023 Morgan Stanley Technology. During that event, he talked about Disney+’s pricing and Disney’s thoughts on Hulu.
When asked about Disney+ and its pricing strategy Bob Iger said, “in our zeal to grow global subs, I think we were off in terms of our pricing strategy, and we’re now starting to learn more about it and to adjust accordingly.” He went on to say that Disney+ needs a “pricing strategy that makes sense.”
Bob Iger also went on to say that Disney needed to justify better what it spends on content vs what it was making. In short, Bob Iger said, “we have to better rationalize our costs” and “obviously, we have to attract more subs.” This was once again talked about during Disney’s earnings call this week as Disney said they will again cut the amount of content Disney is making for its streaming service.
Why the price hikes? Disney+ is not expected to make a profit until 2024 or 2025. Disney has said it wants to focus on making streaming profitable as soon as possible.
The question now is when will Disney+ price go up and by how much.
For now, we will need to see what happens next. What is clear is Disney’s streaming lineup may look very different in the years to come, both in price and what is offered.