Is Disney's New Price Hike a Genius Move, or Did It Go Too Far This Time?
Key Points
Disney is increasing prices for its Disney+ and Hulu subscriptions by 4% to 13%.
Disney+ and Hulu are now the most expensive traditional streaming services, just passing Netflix and HBO Max.
With Disney shares off slightly over the past year, Disney's strong retention rates should deliver record profitability.
- 10 stocks we like better than Walt Disney ›
Well, that didn't take long. The first streaming service price hike of the fall season is here. Disney (NYSE: DIS) made its flagship online video subscriptions a little more expensive on Wednesday. You'll pay up to 13% more for your Disney+ and Hulu plans, especially if you're on one of the ad-free plans.
It will now cost you $21.49 a month for Disney+ without the commercial interruptions, up from the $18.99 folks were paying earlier this week. Hulu subscribers are getting a similar increase. The math is kinder for the ad-supported tiers, with Disney+ and Hulu each climbing just 4% to $12.49 a month.
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Image source: Getty Images.
It's not just Disney
It's not just the House of Mouse with an itchy trigger finger on the price gun. Less than a month ago, it was Apple (NASDAQ: AAPL) turning heads with a 15% increase for Apple TV+. Comcast's (NASDAQ: CMCSA) Peacock Premium Plus pushed through an 18% hike just 10 days before Apple took its bite.
All of these upticks add up over time. At the time of Apple's move in late August, I compared the cost of a basket of the most popular ad-free platforms now to what it would have cost six summers ago. Let's update it to factor in Wednesday's increase at Disney. Here's the summer of 2020:
- Netflix: $12.99
- Disney's Hulu Premium: $11.99
- HBO Max: $14.99
- CBS All Access/Paramount+ Premium: $9.99
- Disney+ Premium: $6.99
- Peacock Premium Plus: $9.99
- Apple TV+: $4.99
- TOTAL: $71.93 a month
Here's where the same seven services stand today:
- Netflix: $19.99
- Hulu Premium: $21.49
- HBO Max: $18.49
- Paramount+ Premium: $13.99
- Disney+ Premium: $21.49
- Peacock Premium Plus: $19.99
- Apple TV+: 14.99
- TOTAL: $130.43
This is an 81% jump over just six years. Part of you might feel cheated. You were wooed by low-priced streaming platform deals that launched around the time the COVID-19 crisis turned us into escapism-seeking homebodies. Now that they have you with the deeper catalogs that they have amassed over the years, you probably feel like you fell for the cord-cutting trap.
You kicked your cable TV company to the curb because it was too expensive. You told your satellite TV company to kick rocks because streaming service subscriptions were too cheap. You might feel cheated now. You pulled the cord. They pulled the rug.
Disney knows what it's doing
You want one shocking takeaway from Disney's latest increase? Consider that when it launched in late 2019, Disney+, without ads, cost just $6.99 a month. This was slightly more than half of what the global market leader, Netflix (NASDAQ: NFLX), was charging. On Wednesday, Disney+ topped Netflix to become the most expensive of the traditional streaming services.
The timing might seem brutal. With rates rising and economic concerns growing louder, folks will start getting choosier about which streaming service stocks they keep and which they cancel. With Disney now the priciest of the platforms, it just drew a target around its online cancellation button.
Disney is still doing something pretty clever here. Before I'm contacted by Disney's media team or any of my fellow shareholders, I know that no one is paying $21.49 a month for Disney+ without ads and another $21.49 monthly for Hulu Premium. You can bundle the two for just $21.99 a month. You're paying just two quarters more per month for ad-free access to both services.
Disney knows the hand that it's holding. The aggressively priced bundle gives it two different ways to acquire a family. Once in, Disney has not one but two sticky mousetraps. I would be shocked if Disney doesn't hold up better on the retention front than Apple TV+ and Peacock following last month's hikes.
This should also help breathe new life into Disney stock. Its streaming operations turned profitable two years ago. Adding another $2.50 per subscriber per month will have a major impact on its bottom line. Disney is ready to win again.
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Rick Munarriz has positions in Apple, Comcast, Netflix, and Walt Disney. The Motley Fool has positions in and recommends Amazon, Apple, Netflix, and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
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