Disney+ raises streaming price by 38%

Wildly popular: People gather at the Magic Kingdom theme park at Walt Disney World in Orlando, Florida. The company added 14.4 million new Disney subscribers in the quarter, beating analysts’ estimates of 9.8 million and bucking the downdraft that’s hit Netflix Inc. — Reuters

LOS ANGELES: Walt Disney Co is raising the price of its flagship Disney+ streaming service by 38%, part of a plan to generate more revenue for its money-losing online businesses and build on third-quarter results that beat estimates for sales, profit and subscriber growth.

On Dec 8, Disney will introduce an ad-supported version of the flagship streaming service and raise the price of the ad-free option to US$11 (RM48.90) a month, the entertainment giant said. Prices for some packages that include Hulu and ESPN+ will also rise.

The price increases, subscriber gains and a strong third-quarter performance from Disney’s namesake theme parks may help reverse investor sentiment that sent the shares down 27% this year through Wednesday’s close.

The company added 14.4 million new Disney+ subscribers in the quarter, beating analysts’ estimates of 9.8 million and bucking the downdraft that’s hit Netflix Inc.

Shares of Disney rose as much as 7.1% in extended trading after the announcement.

Still, many analysts have been sceptical that Disney could meet the ambitious fiscal 2024 target for up to 260 million subscribers that it set two years ago.

Chief financial officer Christine McCarthy told investors on a call that the company now expects between 135 million and 165 million “core” Disney+ customers and as many as 80 million customers for the Disney+ Hotstar product in India by the end of fiscal 2024, or a maximum of 245 million.

The world’s largest entertainment company, Disney is trying to stem losses in its direct-to-consumer business as it navigates a transition from traditional TV viewing to online options.

Disney+, launched in November 2019, includes films and TV shows from the company’s vast library, as well as new series tied to company brands such as Marvel and “Star Wars.” The company has said it expects Disney+ to be profitable in fiscal 2024.

The introduction of an ad-supported tier is meant to boost subscribers and generate more revenue by giving customers options for how much they want to pay for the service.

Disney said last month it sold US$9bil (RM40bil) of ads for the upcoming TV season, with 40% of that going to its online offerings.

Current Disney+ subscribers will begin receiving the ad-supported version unless they agree to pay more for the commercial-free plan.

The Burbank, California-based company reported fiscal third-quarter sales and earnings that beat analysts’ expectations, driven in part by strong performance of its theme parks.

Sales in the period ended July 2 jumped 26% to US$21.5bil (RM96bil), led by soaring park revenue and beating analysts’ expectations of US$21bil (RM93.4bil).

Earnings jumped to US$1.09 (RM4.85) a share excluding some items, topping estimates of 96 cents (RM4.27).

With last quarter’s gain, the total number of Disney+ subscribers has climbed to 152.1 million. ESPN+ now has 22.8 million subscribers and Hulu, including live TV, has 46.2 million. Netflix had 220.7 million subscribers at the close of its latest quarter.

Operating losses at the direct-to-consumer business, which includes the streaming services, more than tripled to US$1.06bil (RM4.7bil), as the company continues to invest in new programming and expand to new territories.

That was worse than the US$697mil (RM3.1bil) analysts expected.

Disney expects to spend about US$30bil (RM133.4bil) on programming in the current fiscal year, down about US$3bil (RM13.34bil) from its original plans. — Bloomberg

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