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Disney to boost prices for streaming, vows crackdown on password sharing

AP – Walt Disney Co Chief Executive Officer (CEO) Bob Iger vowed to make its streaming services profitable via a planned October price hike on its ad-free Disney+ and Hulu plans and a crackdown on password sharing expected to extend through next year.

The increases will raise the monthly cost of ad-free Disney+ by USD3, or roughly 27 per cent, to almost USD14.

The cost of ad-free Hulu will likewise rise USD3 to almost USD18 – a 20-per-cent hike that will make it more expensive than the most popular ad-free tier at Netflix.

Iger spoke following Disney’s release of mixed earnings for its fiscal third quarter ended July 1. 

The company reported a substantial net loss while shedding customers in both domestic and international markets.

Overall, Disney reported a four per cent increase in revenue for the quarter but swung to a net loss of USD460 million from a year-earlier profit of USD1.4 billion. Disney shares, which closed at USD87.49, rose roughly 2.2 per cent to USD89.45 in after-hours trading.

While Disney reported narrower losses on Disney+ in the quarter, the service lost domestic subscribers in the United States (US) and Canada for the second straight quarter.

The Walt Disney Co logo appears on a screen above the floor of the New York Stock Exchange. PHOTO: AP

Internationally, it racked up its third straight quarter of declines, although issues in the Indian market played a large role there.

The service had 146.1 million international customers in its third quarter, a 7.4-per-cent decline from the 157.8 million it reported in the second quarter. That followed a loss of four million streaming subscribers in the second quarter. Domestically, it shed 300,000 subscribers in the third quarter, the same number it lost in the second quarter.

The Disney CEO acknowledged that the price hikes are intended to steer consumers toward cheaper ad-supported versions of these services, whose subscription prices are not changing.

The advertising market for streaming is “picking up”, he said, noting that it’s healthier than traditional TV ads. “We’re obviously trying with our pricing strategy to migrate more subs to the advertising supported tier.”

Iger didn’t provide details about the password-sharing crackdown beyond saying that Disney could reap some benefits in 2024, although he added that the work “might not be completed” that year and that Disney couldn’t predict how many password sharers would switch to paid subscriptions.

Some analysts doubted whether price hikes and getting tough on password sharers can do much to lead Disney back to sustainable growth.

Insider Intelligence analyst Paul Verna said in a note that the company’s moves aren’t likely to calm investors “anxious for clarity on the company’s strategy for its streaming services and TV networks”.

While a narrowing in Disney’s streaming losses is heartening, he argued, the improvements owed more to dramatic cost-cutting than organic growth, suggesting that Iger still doesn’t have a plan for putting Disney on a sound footing.

Disney is in the middle of a “strategic reorganisation” that includes cutting about 7,000 jobs to help save USD5.5 billion across the company. Iger, who returned in November to take over the CEO post from Bob Chapek, has worked over the past several months to turn around Disney’s streaming business while making sure that the financial might of its theme parks doesn’t waver.

Disney announced last month that Iger will remain as CEO of The Walt Disney Co through the end of 2026, agreeing to a two-year contract extension that will give the entertainment and theme park company some breathing room to find his successor.