Disney+ subscribers are going to have to pay more to avoid commercials

Disney+ subscribers will start seeing ads on the popular streaming service starting in December. That is, unless they choose to pay more.

Walt Disney Co. said Wednesday it would launch phased versions of the service on December 8. Current subscribers who continue to pay $8 per month for the “Basic” tier will receive commercials. Meanwhile, subscribers who don’t want ads can upgrade to the “Premium” tier, which costs $11 per month, a $3 increase on the monthly fee.

The price change comes as Disney+ continues to grow steadily but also loses money.

The company’s main streaming service added 14.4 million subscribers in the fiscal third quarter, bringing its global total to 152.1 million. Disney+ had 137.7 million subscribers at the end of the second quarter. According to data from financial information service FactSet, analysts had expected Disney+ to add about 10 million subscribers during the quarter.

However, these numbers come at a price. Disney said its direct-to-consumer segment, which includes Disney+, Hulu and ESPN+, lost $1 billion in the quarter, compared to a loss of about $300 million in the same period a year ago. The company spends billions of dollars each year on direct-to-stream movies and TV shows, a massive bet on the company’s future in an increasingly digital world.

Some analysts have raised questions about the strength of the streaming market or whether the cost of competition is sustainable. Netflix’s recent troubles had Wall Street trembling over the broader media landscape after many big entertainment companies, including Disney, gambled the house on a direct-to-consumer business model. Netflix announced last month that it lost 970,000 subscribers in the most recent quarter, marking a consecutive quarterly decline.

Warner Bros. Discovery said last week that it expects the combination of HBO Max and Discovery+ to have 130 million subscribers by 2025, compared to the 92 million it has now. David Zaslav, CEO of Warner Bros. Discovery, has radically diverted the newly merged companies’ strategy from building HBO Max at all costs.

Disney has tried to adapt by including a broader range of content on Disney+, which started out as a boutique streaming service with mostly family-friendly shows and movies from Marvel, Pixar, Lucasfilm, Disney Channel, and National Geographic. His catalog has expanded to include shows like Black-ish, the upcoming season of Dancing With the Stars, and the R-rated superhero films Logan and Deadpool.

When Disney+ launched in November 2019, it cost just $7 a month, which was relatively cheap for a mass-market streaming service. Now that it offers more, Disney is conveniently charging more.

Disney CEO Bob Chapek received a three-year contract extension in June. The board, which voted unanimously to extend Chapek, cited his leadership through the COVID-19 pandemic, his transformation of the business around streaming, and the company’s performance. The vote came as Disney grappled with a political firestorm in Florida and a falling stock price. Disney shares are down about 30% so far this year.

Disney is also increasing pricing for Hulu, which will now cost $1 more in October for the ad-supported version ($8 from $7), while pricing for ad-free Hulu will increase by $2 per month to $15 US dollar will rise. Hulu has 42.2 million subscribers, not counting the live TV channel version. ESPN had already forecast a price increase from $3 per month to $10 per month.

The more adult-oriented streamer served as the launch pad for Disney’s not-so-Disney material, including films from 20th Century Studios and Searchlight Pictures (formerly 20th Century Fox and Fox Searchlight). Hulu snagged a bevy of Emmy nominations for shows like The Dropout, Dopesick, and Only Murders in the Building. The recently released “Prey” premiered to critical acclaim. The prequel to the long-running “Predator” franchise had strong viewership, according to the company. Hulu doesn’t publish viewership numbers.

Disney reported above-average revenue and profits Analyst expectations for the third quarter. The company had revenue of $21.5 billion, up 26% from the same period last year. According to FactSet, Wall Street was expecting sales to average nearly $21 billion. Profit was $1.4 billion, up 53% from a year ago. Earnings per share of $1.09 beat estimates of 97 cents per share.

https://www.latimes.com/entertainment-arts/business/story/2022-08-10/disney-subscribers-are-going-to-have-to-pay-more-to-avoid-commercials Disney+ subscribers are going to have to pay more to avoid commercials

Sarah Ridley

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