Soon bad news for subscribers to the Disney + video streaming service? During a conference organized by Morgan Stanley Technology, the emblematic boss of the Disney group, Bob Iger, who launched Disney + in 2019 before jumping ship and then being called back to the rescue in 2022, hinted at profound changes this year in the group’s streaming strategy. Starting with an increase in subscription prices.
« In our zeal to attract subscribers, I think we got our pricing strategy wrong. We are now beginning to understand it and adjust accordingly “, he said, before continuing: “ nWe need to better rationalize our costs and obviously we need to attract more subscribers “. But Disney+ now needs a “ pricing strategy that makes sense “because there is a” logout between content costs and how Disney monetizes them, explained the manager.
Disney+ considers it still has a margin on prices
These remarks by Bob Iger come in a difficult context for the Disney group: following two years of meteoric rise, Disney+ lost subscribers for the first time in the last quarter of 2022. Starting from scratch in 2019, the video service at the demand-on-subscription (SVoD) now boasts 161.8 million subscribers worldwide, down 2.4 million from the record in the third quarter of 2022.
Taken in the grip of the explosion of content production costs, the ferocity of competition in streaming, and the high cost of catalog maintenance, Disney+ launched its first offer with advertisements last November in an attempt to diversify its sources of income. The group took the opportunity to significantly raise the price of its subscriptions without , from 7.99 dollars to 10.99 dollars per month in the United States (from 6.99 to 8.99 euros in France).
But this adjustment seems insufficient in the eyes of Bob Iger. During the presentation of the 2022 results last February, the boss noted that despite the price increase, ” we only suffered a marginal loss of subscribers…and that’s telling us something ».
Translation: the company believes that it can still increase its prices without significantly penalizing its ability to recruit new subscribers or lose too many followers, thanks to the strength of its catalog composed in particular of Marvel, Star Wars, Disney, Pixar, National Geographic or 21th Century Fox studios. In the United States, Disney+ is actually cheaper than its two main competitors, Netflix (whose standard subscription without ads is $13.99/13.49 euros) and HBO Max ($15.99/not available in France ).
Rationalization of costs
For Bob Iger, this forced rationalization to adapt to the economic context does not call into question the relevance of the business. « I’m bullish on streaming, which is a robust platform and a great proposition for delivering high-quality content to the consumer. I think everything will eventually migrate to streaming he said, including the other jewel of the Disney group, the ESPN channels, which currently have their own service.
Still, the current economic impasse in streaming – the group’s three platforms, Disney+, Hulu and ESPN+, posted operational losses of one billion dollars in 2022 – has already forced the company to drastically cut certain costs. Following the disappointing results of the last quarter of 2022, Disney has already laid off 7,000 employees.
The future of Hulu would also be in the hot seat. Unpublished in France, this streaming platform launched in 2007 in the United States is one of the pioneers of SVOD. Very popular with advertisers and with 48 million subscribers at the end of 2022, Hulu is currently 66% owned by the Disney group, and 33% by the Comcast group, which launched its own streaming platform in 2020. Peacock, also unpublished in France.
But the contract provides that from January 2024, it is possible for one of the parties to buy back the shares of the other. Until last year, Disney, which already owns most of Hulu, seemed determined to pay the approximately $27.5 billion that corresponds to Comcast’s stake. Problem: the difficulties of streaming are reshuffling the cards, and the American press has been reporting for a few months on the possibility, very seriously considered internally, that Disney will let Comcast buy back its shares.
Even if it means losing the notoriety and prestige of the Hulu brand, and repatriating some of the content from Disney studios that is currently on Hulu to Disney+. ” We’re really looking at the business very, very carefully,” Bob Iger said. we want to understand where this might go “, he continued, enigmatic.
Switching to a premium strategy
After the growth at all costs of the 2019-2022 period, Disney is therefore entering full foot, like its rivals Netflix and Warner Media Discovery (HBO Max), into the era of rationalization and “premiumization” of the service. In turn, Bob Iger declared his intention to produce less content from 2023, but to aim for more quality and economic and cultural impact for his TV series. This confirms the end of the era of “peak TV” or the disproportionate inflation of the television offer.
Disney’s other strong move envisaged in 2023 might therefore be to start producing content more massively for its competitors. With the emergence of streaming platforms in recent years, most major studios had refocused their production on their own group’s platforms to feed the house catalog.
In the same spirit, Disney had tried to repatriate as much as possible to Disney + the TV series and films produced by its studios but broadcast by competing platforms such as Netflix and Amazon Prime Video. But the group was thereby depriving itself of significant licensing revenue while exploding its hosting and catalog costs.
Now, this era of exclusivity seems to be over. ” As we seek to reduce the content we create for our own platforms, there are likely opportunities to license third parties. Why not use this content to increase our income? said Bob Iger. A new phase for video streaming is well and truly underway in 2023.