If you love Disney+, you're going to have to pay a little more to stream Baby Yoda, your latest Marvel obsession, and your favorite Pixar movies.
The company announced during its latest earnings report on Wednesday it was increasing the price of its Disney+ service to $10.99 a month, up $3 from its current offering.
However, for those looking to keep things the way they are, Disney will be launching an ad-supported version of the service for $7.99 a month in the U.S. starting December 8. It will also offer an ad-free Disney+, Hulu with ads, and ESPN+ with ads bundle for $14.99 a month, an increase of $1.
"Given the intense competition in the subscription space and the belt-tightening that typically comes with inflation and market turmoil, Disney is wise to give consumers the option of a lower-priced tier," Paul Verna, Insider Intelligence Principal Analyst, said. "The key will be striking a balance between ad monetization and a positive consumer experience, which means they have to hit the nail on the head when it comes to the number of ads they serve per hour."
Disney+ welcomed 14.4 million subscribers this past quarter to reach 152.1 million during the fiscal third quarter of 2022 according to its latest quarterly report on Wednesday, beating a FactSet projection of adding 10 million subscribers. In addition, Disney posted earnings of $1.09 per share on an adjusted basis and revenue of $21.5 billion, both ahead of the Refinitiv estimates.
The company also adjusted its 2024 streaming subscriber goals down 15 million accounts to 215 million from 245 million and maintained it will reach profitability in the streaming division that same year. The lower figures were due to the loss of Indian Premier League cricket rights and projected subscriber losses in its Disney+ Hotstar division in India, although projections for the main Disney+ product remained the same.
"In the streaming wars, Disney+ is currently winning — winning subscribers during a time when Netflix is losing them," Mike Proulx, Forrester research director and vice president, said. "Momentum continues to be on the side of Disney+ due to a strong content slate based on its IP that has universally mass appeal."
With operating losses mounting as its original content gets more expensive to produce, it was only time before Disney+ decided to ask viewers to pay a little more. The ad-supported version also gives Disney another revenue stream, but it will need to continue to have shows and movies people want.
"It's critical that Disney+ keeps pace with a compelling content slate in the back half of this year in order to justify not only its continued expense but a steep price hike in December," Proulx said.
The ad-supported version gives another option to people looking to save a little more while inflation causes prices around them to rise. About 61 percent of U.S. online adults think the country will experience a recession within the next 1.5 years, and more than half believe they will reduce their overall spending for the rest of the year, according to a July Forrester poll.
And, Disney's foray into adding ads isn't new, considering its media networks have been ad-supported. It also has experience in running ad-supported streaming with its platforms Hulu and ESPN+ without alienating customers. Brands tend to like Disney+'s offerings, thanks to its family-friendly programming.
"The strategy of combining these two monetization models makes perfect sense for Disney, as it has for Disney's own Hulu service, and as it will for Netflix starting next year," Verna said.
