Disney is following in the footsteps of its major rival, Netflix, and will crack down on password sharing in an attempt to improve revenue on its streaming service.
The company’s CEO, Bob Iger, revealed different strategies Disney was considering to counteract losses on its Disney+ streaming service, including introducing policies to prevent multiple people using one account.
In 2022, Netflix introduced new fees for people sharing accounts but who did not live in the same household, in a bid to fight a decline in subscribers. Netflix claimed of the 222 million global households with subscriptions, there were “100 million additional households” accessing the service through password sharing.
Kena Betancur
Iger made the comments on password sharing during the company’s 2023 third-quarter financial results call on August 9, but did not expand further on what the policies would look like, only that the company “will begin to update our subscriber agreements with additional terms and our sharing policies” later this year, and “will roll out tactics to drive monetization sometime in 2024.”
The CEO also revealed Disney+ subscribers would face a second price hike this year as the company looks for new way to cut costs. But during the call, Iger revealed Disney had slashed costs by more than the $5.5 billion it had promised investors earlier this year.
“We know we have much work to do,” Iger told investors as he compared the fortunes of Disney+ to rival Netflix.
“Our streaming business is still actually very young. In fact, it’s not even four years old… and we would love to have the margins that Netflix has. They’ve accomplished those margins though over a substantially longer period of time.”
Iger described how Netflix “figured out how to really carefully balance their investment in programming with their pricing strategy and what they spend in marketing.”
Disney revealed today that starting from September 6, U.S. subscribers will be able to sign up to a bundled plan which includes Disney+ Premium and ad-free Hulu for $19.99 per month.
“We’re [Disney+] new at all of this, we actually have not really achieved the kind of balance we know we need to achieve in terms of cost savings and pricing and money spent on marketing and of course all the other things that we’re looking at from a technological perspective that grows engagement with our customers, like, for instance, recommendation engines,” he said.
He promised investors that executives had spent a lot of time looking at ways to cut costs while growing profits at the streamer.
“We’ve done a tremendous job in a very, very short period of time of exceeding the root reductions that we said we were going to achieve and that’s obviously a major step in the direction of improving our margins,” Iger explained.
The CEO said Disney was working on “perfecting our pricing and marketing strategies” after originally investing in spending money on content to “fuel subscriber growth.”
“I’m reasonably optimistic and hopeful that we will be improving our margins in this business significantly over the next few years, but I’m not going to make any any further predictions in that, except the good news is that we know how much work we have to do,” Iger said.
Disney+ saw a smaller loss this quarter, almost breaking even, despite the fact it lost subscribers and now has 146.1 million globally which is below this quarter’s target of 154.8 million.
The subscription revenue totals were due to the higher cost of Disney+ for subscribers and a decrease in marketing costs.
Disney also decreased spending at its Parks, Experiences and Products departments in order to invest more in technology to support its streaming services, which also include ESPN and Hulu.
The streaming services’ revenue increased 9 percent to $5.5 billion, while operating loss decreased to $0.5 billion from a previous loss of $1.1 billion.
Iger also revealed that 3.3 million people signed up to the ad supported Disney+ option.
“Since its inception, 40 percent of new Disney+ subscribers are choosing an ad supported product,” he said.
Following its successful launch in the U.S., Disney+ will roll out the ad-supported service in select markets across Europe and in Canada from November 1.
“The strong momentum of our ad-supported plans in the U.S. demonstrates the importance of providing consumers with choice, flexibility and value,” said Joe Earley, president, Direct-to-Consumer, Disney Entertainment.
Internationally, Disney+ will also offer more subscription options in some markets across Europe, the Middle East, Africa (EMEA) and Canada. The new ad-supported plans start at €5.99 ($6.58) per month in EMEA and $7.99 (USD$5.95) per month in Canada.
Those who already subscribe to Disney+ in those markets will retain their existing plan with no ads but will face a price increase in December, unless they choose to swap to a lower price plan.
