Disney+ launched with a very competitive price in November 2019 and after a little over one year of meteoric subscriber growth, the price is going up.
Beginning March 26, 2021, Disney+ will be priced in the U.S. at $7.99 per month or $79.99 per year, while the Disney Bundle with Disney+, Hulu, and ESPN+ will be priced at $13.99 per month.
The price increase was inevitable. Disney+ now has 86.8 million subscribers – which means it will likely blast past its original 2024 guidance before the end of the year. Now the company believes the service could have as many as 260 million subscribers by 2024. The growth will likely be sparked by the massive wave of content from Marvel, Star Wars, Disney and Pixar.
With such an influx of original series and movies, Disney+ is expecting a significant increase in content expenses. In April 2019, the company expected Disney+ would spend approximately $4.5 billion on content in 2024. This week, the company raised that estimate to between $8 billion and $9 billion. Disney is still forecasting that Disney+ won’t become profitable until 2024 but the company said the service’s operating losses should peak in 2021 instead of 2022.
Disney also announced that in early 2021 it will be launching a new Hotstar general entertainment service not as a standalone app but as a new tile within Disney+ in some international markets. As a result, the price of Disney+ will increase to €8.99 in continental Europe and to a local equivalent in other markets including Canada and Singapore. In Latin America, there will be a standalone service called Star+ that will include on-demand content and live sports.
MoffettNathanson said that after putting together all of the domestic and international subscriber growth estimates, it now believes Disney+ could reach 345 million subscribers by 2024, which also increased the research firm’s revenue forecast to $40 billion.
“However, this revenue upside is essentially offset by a similar significant increase to expenses leading to only a modest positive revision to our [full year] 2024 EBIT of +$150 million or roughly breakeven,” wrote Michael Nathanson in a research note.
Disney’s total direct-to-consumer content spending – including ESPN+ and Hulu – could increase to as much as $16 billion by 2024. UBS analyst John Hodulik said that level implies Disney is paying around $4 per subscriber.
As of October, Disney+ average revenue per user was hovering around $4.52. The price increase in March will nudge that number up but it’s likely that Disney+ still has more room to expand margins and ARPU.
“As viewing habits and trends evolve further over the coming years, we will calibrate and adapt our content creation, distribution and pricing, all while maintaining a strong value proposition for our consumers,” said Disney CFO Christine McCarthy during Thursday’s investor presentation, hinting that March almost certainly won’t be the last Disney+ price increase before 2024.