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Why Disney+ is increasing the subscription price

Why Disney+ is increasing the subscription price

Now that Bob Iger is back at the helm of Disney, one of his top priorities is likely to 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 company is just losing more and more money, and investors are getting impatient.

It’s a whole new world for streaming these days, said Charles Schreger, a New York University marketing professor and former HBO executive. After years of chasing growth at any cost, the industry is facing a sobering reality.

“Streaming is a terrible business,” he said.

Streamers are in a bind, Schreger said. They cannot count on more subscribers in an already saturated market, but they also cannot afford to back down on expensive content because the competition is fierce.

“The consumer is getting used to being able to switch between services,” he said. “All you have to do is push a button and you’re unsubscribed.”

Keeping consumers engaged with new content is especially important to Disney, said Michael Pachter, analyst at Wedbush Securities.

“They have the other competing concern of creating content on Disney+ that has value beyond Disney+,” he said.

Content that pushes the business into theatrical releases, theme parks and merchandising, for example. So if cost-cutting isn’t a good way to make money, the faster solution is to raise prices, Pachter said.

Which Disney does. Starting December 8, the cost of Disney+ will increase from $7.99 to $10.99 a month if you want the service without ads. Like Netflix, Disney is launching a lower-priced ad-supported tier.

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“I’m sure it’s going to be welcomed by advertisers who are thirsty to infect any form of entertainment that people enjoy,” said Ross Benes, analyst at Insider Intelligence.

This trend of higher prices or more ads — you know, the 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.”

It’s not exactly a fairytale ending.

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