Taking the Mickey: Disney hikes subscription costs 27 per cent – even as users fall by 11 million
Disney has upped subscription prices and is rolling out an ad-supported plan despite losing subscribers since February.
Current users of the Disney+ advertising-free plan now face a 27 per cent price hike for the streaming service, which features Disney classics and the Marvel franchise movies among other shows.
Disney+ is set to launch a new ad-supported tier in the UK and other European countries starting 1 November at £4.99.
However, the Californian home of Mickey Mouse is struggling to hang on to subscribers, losing 11.1m in its most recent quarter, with a total of 146.7m.
Following a period of rapid growth, Disney+ experienced its first decline in subscriber counts in February.
Disney chief executive, Bob Iger, acknowledged the need for improvement, saying the firm has “work to do”.
However, he added he is “incredibly confident in Disney’s long-term trajectory.”
Shares in the company are down 0.7 per cent on Thursday morning.
“Bob Iger is not walking off into the sunset with his work at the House of Mouse done anytime soon,” said AJ Bell investment director Russ Mould.
“Having rejoined to fix an ailing business, it is undoubtedly proving more tricky than first thought and the extension to his contract by two years out to 2026 was both reassuring but also an admission of an extended timeline for the turnaround,” he explained, adding that the actors’ strike in Hollywood is “another wrinkle” for Iger.
“Disney is following in the footsteps of Netflix by cracking down on password sharing and increasing subscription fees. This seems to have worked out for its streaming rival which doesn’t have the same wealth of content as Disney.”
In its third quarter update for the three months ending on July 1, Disney saw a four per cent increase in total revenue.
Iger returned as Disney’s chief in November following the tumultuous tenure of his successor, Bob Chapek.
Last month, the Disney boss extended his contract by two years with his annual bonus set to reach up to 500 per cent of his annual base salary of $1m (£765,000) – five times its previous size.
The company synonymous with its resort parks is currently restructuring itself.
In April, Disney announced it was cutting thousands of jobs, taking the total number of layoffs to 4,000 since it first announced it would start axing jobs in February as part of a $5.5bn (£4.54bn) cost-cutting drive.
Matt Bradley, managing director UK at Sullivan & Stanley, a specialist change consultancy, said the “ambitious” restructuring is an “important focus” but Disney also needs a “transformation strategy that focuses on constant improvement.”
“It’s important to look inward and reassess every element of the company’s structure and operational strategy for enduring success,” he added.
In a recent consumer survey by Recurly, a subscription billing service, 68 per cent of millennials and 55 per cent of Gen Z would reconsider opening a cancelled subscription if they could personalise their plans according to their usage.
Oscar Wall, general manager of EMEA for Recurly, said there is a “changing tide” in consumer adoption of streaming services.
He said Disney is in a good position “to offer varying and bundled services for a more personalised experience that drives growth and, subsequently, strong relationships with subscribers.”