The streaming business is no fairy tale. Just ask Disney.
The streaming business is no fairy tale. Just ask Disney.
Now that Bob Iger has once again taken the reins at Disney, one of his top priorities will likely be turning around the company’s streaming business, which includes Disney+, ESPN+ and majority ownership of Hulu. In recent years, Disney has spent heavily on original content to grow its subscriber base and compete in a crowded streaming market. But the business just keeps losing more and more money, and investors are getting impatient.
It’s a whole new world for streaming these days, said Charles Schreger, a marketing professor at New York University and a former HBO executive. After years of chasing growth at any expense, the industry is up against a sobering reality.
“Streaming is a terrible business,” he said.
Streamers are in a bind, Schreger said. They can’t count on more subscribers in an already saturated market, but they can’t afford to pull back on expensive content either because competition is fierce.
“The consumer is getting used to being able to switch between service and service,” he said. “All you’ve got to do is press a button, and you unsubscribe.”
Keeping consumers engaged with new content is especially important to Disney, said Michael Pachter, an analyst with Wedbush Securities.
“They have the other competing concern of creating content on Disney+ that has value beyond Disney+,” he said.
Content that pushes business to theatrical releases, theme parks and merchandising, for example. So if cost cutting isn’t a great path to turning a profit, the quicker fix is to raise prices, Pachter said.
Which Disney is doing. Starting Dec. 8, the cost for Disney+ will increase from $7.99 to $10.99 a month, if you want the service with no ads. Like Netflix, Disney is rolling out a lower-priced ad-supported tier.
“I’m sure it’s going to be welcomed by advertisers who are thirsty to infect any sort of entertainment that people enjoy,” said Ross Benes, an analyst at Insider Intelligence.
This trend of higher prices or more ads — you know, the stuff cord cutters were trying to escape — well, it’s here to stay, according to Benes.
“Streaming is only going to get worse for consumers. The best days are behind us,” he said. “And that’s because everyone has to make money.”
That’s not exactly a fairy tale ending.
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