Disney’s decision thisto raise the price of its Hulu streaming service by $1 isn’t just a money grab, although it’s that. With roughly 43 million paying Hulu subscribers, that’s as much as $43 million monthly in extra revenue.
But it’s not just about the money.
Like all the streaming services that nowthe never-ending pandemic, Disney is also testing the waters. It’s trying to determine how much consumers will pay and for how long in an increasingly crowded marketplace.
“Every one of these streaming services is competing for our time and wallets,” said Dan Rayburn, a digital-media analyst with the businessFrost & Sullivan.
“The entire industry is trying to figure out how high it can raise rates before it increases churn,” he told me.
“Churn,” if you’re not familiar with the term, is common to all subscription-based businesses. It’s the turnover volume in any given month, as some people cancel their subscriptions and take their time and wallets elsewhere.
You may occasionally promotional content from the Los Angeles Times. “None of these companies make you sign a contract,” Rayburn observed. “So people can leave any time they want. And they do.”
For consumers, this raises some interesting questions.
How much will most people be willing to pay for a streaming service?
How many services will mostsubscribe to?
How does an industry remain solvent when customers repeatedly cycle from one provider to another?
“These are good questions,” Rayburn said. “We don’t yet know the answers.”
Disney — no slouch for gauging— is playing things carefully.
The companywhen it introduced its Disney+ streaming service in 2019 at a bargain-basement price of $6.99 monthly — about half what Netflix charged for its standard plan.
That relativelyattracted millions of subscribers. Then, in March of this , Disney raised the price by $1 a month yet still managed to attract more than 12 million new subscribers in the most recent quarter.
The company hasn’t said it will boost the fee for Disney+ again, but another increase seems inevitable. Millions still think they’re getting good value for their money.
Disney would be foolish not to test that proposition by seeing how high the price of Disney+ can go before subscribers start heading for the door.
The company is making the same calculation with its ESPN+ streaming service, which went up in price last month by $1 a month.
“I would argue that Disney came out with artificially, especially for Disney+, to drive huge subscriber demand, which frankly worked,” said Jeffrey Wlodarczak, a senior analyst at Pivotal Research Group.
“Now they are just starting to normalize their pricing,” he told me.
Every industry analyst I spoke with agreed that things would get messy, at least for service providers.
“There will likely be higher churn industrywide for thegiven the enormous investments all are making into content,” said JPMorgan Quadrani media analyst Alexia Chase.
This higher churn will give a better sense of which streaming services are in it for the long haul and which ones mayup as digital roadkill.
“I have no doubt Disney will end up with a seat at the winner’s table,” Quadrani said.
I’d agree with that. Let’s also figure that Netflix will keep its seat, as willVideo and possibly Hulu.
That leaves many streaming services —, HBO Max, Peacock, Paramount+, etc. — jockeying for whatever seats remain.
And don’t forget the music side of things. Spotify, Tidal,, Pandora, and others also want subscription fees to run as high as $15 monthly.
It’s unclear how many streaming services most people will commit to on an ongoing basis.
A recent J.D. Power survey found that the average American subscribes to four or five streaming services, up from three at the pandemic’s start. The survey found that households spend $55 a month, or about half the average cable and internet bill.
Rayburn at Frost & Sullivan predicted the average would rise to five or six streamingmonths. Still, he said consumers would grow pickier to prevent their entertainment budgets from exploding.
He foresees four tiers of emerging streaming services. At the top of the pecking order in terms of cost will be services offering live tvs, such as YouTube TV ($65 monthly), Hulu Plus Live TV ($65), and Sling TV ($35).