Maybe Disney+ should have raised prices even more

When Disney+ raised prices by $3 a month to $10.99 in December — a not insignificant increase of about 38 percent — users didn’t blink. (Ad-supported Disney+ launched, simultaneously inheriting the previous price of $7.99 for ad-free.)

According to data from subscription analytics firm Antenna, 94 percent of former subscribers to the ad-free Disney+ service stayed with the product after the price increase, The Wall Street Journal reported. Or, to channel Queen Elsa of Arendelle, Almost Nobody “Let It Go.” That’s an impressive avoidance of churn or subscriber termination of a service.

This, coupled with recent comments from CEO Bob Iger, suggests Disney+ has scope to charge its loyal customers even more. And why not? Losing 6 percent of customers with a 38 percent increase in APRU (average revenue per user) is just good, solid metrics. It’s a way to accelerate the creep toward profitability by at least a few months.

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Earlier this month, speaking at Morgan Stanley’s technology, media and telecoms conference, Iger said he was “extremely optimistic” about Disney+, which has “grown.” [subscribers] at such a meteoric pace.”

That pace was cool, and it’s certainly “a route to profitability,” as Iger later put it – it just isn’t be.

Iger’s successor/predecessor Bob Chapek went all-in in the race for his goal of 230 million to 260 million Disney+ subscribers by the end of fiscal year 2024. To do this, he kept the monthly rate low and took part in a whole range of free trials. Iger, who shocked the industry by resigning from Chapek’s post in November, disagrees with these methods.

“In our rush to grow global subscribers, I think we were wrong on our pricing strategy, and we’re now starting to learn more about it and adapt accordingly,” Iger said at the conference, adding, “We’ve got one off.” From a price point of view, there is a lot of need for rationalization.”

Call out the cash register sound effect, Imagineers.

Disney+ ended 2022 with 164.2 million subscribers worldwide, of which 61.3 million came from the financially effective Disney+ Hotstar. (Refer to this ARPU thing.) The company expects Disney+ to be profitable in fiscal 2024. (Hulu, currently owned two-thirds by Disney and one-third by Comcast, is the only major streaming service — other than Netflix — that’s profitable. )

Disney

“Disney+ truly is the ultimate on-call babysitter,” Rich Greenfield, media analyst at LightShed Partners, told WSJ this weekend. “When you look at the popularity of titles like ‘Moana’ and ‘Mickey Mouse Clubhouse,’ it’s clear what resonates with families. My guess is that even at $10.99 there is still pricing power.”

Disney itself has stated that half of its Disney+ subscribers are families with children. As a father of two young children aged 6 and nearly 3, This writer can confirm the value exceeding the sticker price. You can try to pry “Bluey”, “Frozen” and “TOTS” out of their cold hard grips, but I wouldn’t recommend it.

It’s worth pointing out here that Disney+’s price increase in December wasn’t Iger’s call — the Chapek administration raised the ad-free price point in August to make room for the streamer’s then-upcoming ad-supported tier.

Ad-supported Disney streaming signups, including Hulu and ESPN+, accounted for 20 percent of new signups in December, 27 percent in January, and 36 percent in February per antenna. Compare that to Netflix’s “Basic with Ads” tier, which accounted for 9 percent of new signups in November, 15 percent in December, and 19 percent in January.

(Netflix launched its ad-supported plan a month earlier than Disney+ in the US and other key territories, so the shift has paid off these months. After a slow start, Basic with Ads has now reached 1 million subscribers.)

In its first three months, Warner Bros. Discovery’s ad-supported HBO Max plan received 14 percent of new subscribers in June 2021, 16 percent in July, and 21 percent in August. HBO Max costs $9.99 with ads or $15.99 without.

Disney+ launched in 2019 for $6.99 a month, which was a lot cheaper than its main competitor Netflix even then. The ad-supported Disney “Duo” Bundle, Disney+ and Hulu, is now $9.99. The “Trio,” which also includes ESPN+, with ads is $12.99 a month; ad-free it costs $19.99.

Netflix is ​​cheapest with ads at $6.99 per month; The ad-free “Basic” plan costs $9.99. The standard ad-free tier – which most of you probably have – costs $15.49. The top tier costs $19.99.

With these prices and real babysitting rates starting at basically $20/hour, Disney+ is a bargain – for now. (Bonus if you get it for free with a cell phone plan!) That might not hold true forever.

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