Disney just raised the price of their streaming service Disney+ by 27%. That makes the statement that Disney actually WANTS you to pay less for the service seem a little silly, but before you dismiss it outright, hear me out. It actually makes complete sense.
Last year, Disney+ split its subscription service into different tiers. You could pay more and keep your service as it was with no ads, or you could spend less and enjoy the same content with commercial breaks. This was a similar concept to Hulu’s subscription set-up and allowed Disney an extra revenue source on their struggling streaming platform.
The recent price increase on Disney+ only applies to the ad-free tier. In the Q3 Earnings statement, CEO Bob Iger revealed Disney’s strategy and said that this was done solely with the intent to drive more subscribers to the ad tier service.
Iger said, “We’re actually keeping the advertiser-supported product flat in terms of prices. That’s being done for a reason … The advertising marketplace for streaming is picking up. It’s more healthy than the advertising marketplace for linear television. We believe in the future of advertising on our streaming platforms, both Disney+ and Hulu. And we’re obviously trying with our pricing strategy to migrate more subs to the advertiser-supported tier.”
It makes sense that they would prefer the majority of subscribers to be ad-supported. Disney benefits greatly from advertiser revenue on the platform, but only if viewers see those advertisements. Currently, 40% of new subscribers sign up with the ad-supported tier. Disney would like to see that number grow to more than half.
Disney+ has struggled to be profitable since it’s launch in late 2019. To succeed they need to keep finding ways to get the platform out of the red and making money. They’ve recently cut much of the new original programming slated for the site and the price increase is just another way they hope to increase eventual profitability.