The Walt Disney Co. said Wednesday it is raising prices for streaming subscribers in the U.S. who want to watch Disney+ without commercials, as more viewers see what CEO Bob Chapek described as “the best value in streaming.”
The price increase is tied to a new tiered service that Disney will launch in December for US subscribers. The basic Disney+ service costs $7.99 a month today. Starting in December, that basic service will run ads, so subscribers who don’t want any ads will have to upgrade to the premium service, which starts at $10.99 a month, a 37.5% increase over current prices. An annual plan costs $109.99.
“We expect the ad tier to be popular, and we expect some people will want to remain ad-free,” Chief Financial Officer Christine McCarthy said in a conference call with analysts.
Netflix’s most popular streaming plan in the US is now $15.50 per month, and its top-of-the-line plan is $20 per month. It follows several rate hikes to help pay for its original programming, which became even more significant after Disney pulled its programming and classic movies from Netflix after licensing agreements between the companies expired.
Disney said it added 14.4 million subscribers to its Disney+ streaming service in the April-June fiscal quarter. In total, subscribers to all Disney streaming services, which include Hulu and ESPN+, are about 221 million, slightly ahead of entertainment giant Netflix in the streaming wars.
Netflix ended June with 220.7 million subscribers after losing nearly 1 million subscribers the previous quarter.
Paid subscriptions for Disney+ grew 31% internationally over the same time last year. But revenue growth has not been strong due to operating losses from “higher programming and production, technology and marketing costs.”
Disney’s growing streaming sales, combined with its theme park business recovering after a pandemic-era shutdown, led the Burbank, Calif.-based entertainment giant to beat Wall Street expectations with quarterly earnings on Wednesday.
Disney reported revenue of $21.5 billion in the three months to July 2, up 26% from the same time last year.
Excluding certain items, earnings per share came to $1.09. Adjusted earnings per share were expected to be 97 cents on revenue of $20.99 billion for the quarter, according to FactSet Research, according to a FactSet survey.
Disney said sales in its Parks, Experiences and Products division rose to $7.39 billion, up 70% from $4.34 billion a year earlier. The numbers represent an ongoing rebound from the COVID-19 restrictions that temporarily closed all of Disney’s parks in 2020, reduced capacity through 2021, and continue to affect some locations, such as Shanghai Disneyland, which was open for just three days in the April-June quarter.
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