After months of downbeat news from Netflix and Peacock and Roku, Wednesday’s Walt Disney Co. earnings call felt like a visit to the happiest (streaming) place on Earth. Disney+ signed up 14.4 million more subscribers this spring, blowing past industry expectations that it would gain about 10 million new homes and defying the recent slow-to-no growth trend at other platforms.
There were asterisks, of course: Almost none of the growth came in the U.S. or Canada, where memberships inched ahead by a mere 100,000 subscribers. Instead, more than half of the gains were attributed to India and Southeast Asia, where Disney sells a version of its app called Disney+ Hotstar that generates far less revenue per subscriber. But up is up, and Wall Street was very happy with what it saw: Disney’s stock has been soaring ever since the numbers were released.
But while investors had reason to cheer, the news for consumers was far less positive. Remember the ad-supported version of Disney+ the company has been promising since March, the one that Mouse House execs said would let subscribers save some money in exchange for watching commercials? Turns out Disney will instead simply start charging more for the luxury of avoiding ads — a lot more. As was announced yesterday, the cost of keeping Disney+ as is (without ads) will jump nearly 40 percent, from $7.99 to $10.99 per month, as of December 8. And if you happen to be one of those diehard Disney stans who locked in your rates for three years as a charter subscriber by paying in advance, get ready for some serious sticker shock: Your effective monthly rate will nearly triple, jumping from just under $4 per month for ad-free Disney+ to $11. Hulu is also hiking its prices.
Disney clearly thinks its service has built up enough consumer loyalty that it can weather any blowback from these major hikes. And it is also smartly offering budget-sensitive consumers multiple ways to save money. For one thing, if you don’t want to pay more, you can just accept the ads: Disney says there won’t be a ton of them, and shows aimed at younger kiddos will remain ad-free. It has also moved to make the various Disney streaming bundles more of a value, with lots of mix-and-match options, including one with ad-supported Hulu and Disney+ for just $9.99 per month. Yes, it will actually be cheaper to subscribe to Disney+ and Hulu than just Disney+, which tells you how much Disney really wants you to think of the two apps as partners. (It’s also laying the groundwork for the inevitable unification of Hulu and Disney+, but that’s a whole other issue.)
Making TV cost more is never something to get excited about (unless you’re a Disney shareholder). Cord-cutters who initially found streaming to be a low-cost nirvana have seen that dream pretty much dashed as the number of streaming platforms has exploded and prices have risen. But making an endless number of new shows (especially ones from Marvel or Star Wars) ain’t cheap, and Disney — like its competitors — needs to start generating more cash from its streaming investments. One way to do that is to cut costs and give subscribers a bit less bang for their buck (as we examined yesterday). The other is to make folks pay more, which is what Disney is doing this fall. It is possible that at some point consumers will revolt and start trimming the number of streaming subscriptions; more tech-savvy folks might even start thinking about returning to illegal torrents (some never stopped). But for now, making the economics of streaming work means making customers a little less happy.