Disney’s Expensive Streaming to Drive Customers Away

As Walt Disney Co. (NYSE: DIS) released its earnings, one thing that became clear is that its streaming subscriber base will not grow as fast as it did in the past. However, the numbers showed it likely has as many subscribers as Netflix Inc. (NASDAQ: NFLX). Disney still loses money on these products. Netflix is in growth trouble, and this, along with high production prices, has eroded its bottom line.

Two-thirds of Americans have at least one paid TV service. The average number of subscriptions per household is about four. Therein lies the problem of streaming businesses, of which there are over 30 in the United States.

The largest streaming services have an advantage. With well over 100 million streaming clients, Amazon, Netflix and Disney dominated the markets. The only way to make more money as the growth of their number of subscribers slows is to increase prices. Disney+ will take its subscription fee up $3 to $10.99 in the United States in December. Netflix has resorted to a similar strategy.

The crowded streaming industry has several other companies with both money and large libraries. These include HBO Max, Peacock, Paramount+ and Apple TV+. Warner Bros. Discovery just said it will tinker with its channels and offer more channel bundles. The move is untested. However, what is clear is that households with four streaming subscriptions may end up paying hundreds of dollars a year more for these services.

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The wildcard in the industry is Apple. It has a limitless amount of money to spend on building its service. And it will do so. It sees streaming as a way to hold on to iPhone and Mac owners and future buyers. It almost certainly will keep its prices low to pick up market share. It is also increasing its inventory of shows and movies by the week.

Price increases among the existing streaming services may backfire. What companies make on higher prices they could lose on cancellations.

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