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Disney Plus Raising Prices for Subscriptions after Operating Loss: Are SVOD Services in Trouble?

Disney Plus Raising Prices for Subscriptions after Operating Loss: Are SVOD Services in Trouble?

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Aug. 11 2022, Published 1:22 p.m. ET

Disney Plus has quickly become one of the world's most popular streaming video on demand (SVOD) services.

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With a massive library of original content, and ownership of both Marvel and Star Wars, there are few SVOD services that can compete with Disney's brand recognition.

But they just posted a huge operating loss - forcing them to up the monthly subscription cost for users. Here's why that happened and what you need to know as a current or potential subscriber to Disney +, ESPN + or Hulu +.

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Prices Going Up for Disney Plus, Hulu and ESPN Subscribers

Disney's original content is hot hot hot right now, so how is it possible that their last quarter saw an operating loss?

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Simply put, they started cranking out some costly content.

Disney added 15 million new Plus subscribers in the last quarter, which is fully a third more than they expected, but lost $1.1B in operating costs. That's $300M more than they anticipated. The huge contrast between subscriber growth and operating cost overreach comes as a result of a plethora of new costly original content, many in the Marvel and Star Wars realms.

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But part of why they saw that +15M subscriber growth was due to exactly that costly content. So instead of cutting it out to save costs, they're hiking up subscriptions per month to try to even it out.

Starting December 8, Disney+ with commercials will cost $7.99 a month. Without commercials, users will soon pay $10.99 per month. Hulu + subscribers without ads will see their pricing increase $2 from $12.99 to $14.99 starting October 10. Hulu with ads is seeing the most modest increase, only raising $1 to $7.99. ESPN with ads will increase to $9.99.

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CNBC adds, "For existing customers only, a bundle of Disney+ without ads and Hulu and ESPN+ with ads will increase by $1, from $13.99 to $14.99.

The price of a bundle of Disney+, Hulu and ESPN+, all with ads, will be $12.99, or $1 lower than the current Disney bundle price.

Consumers will be able to purchase a Disney+ and Hulu bundle for $9.99 per month with commercials. That’s a discount to paying for Disney+ and Hulu with ads separately.

The price of a no-ad Disney+ and no-ad Hulu, with ESPN+, remains $19.99 per month.

Disney will also have new pricing for its Hulu with live TV bundles. Subscribers that want Hulu with live TV and Disney+, Hulu and ESPN+ with commercials will pay $69.99 per month. For existing customers, Disney will offer Disney+ without commercials in that bundle for $74.99. The premium bundle of Hulu with live TV along with Disney+ and Hulu without ads will be $82.99 per month."

Are SVOD Services Heading for Obsolescence?

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If even Disney can find it difficult to keep up in the SVOD world, that's leaving many wondering: are SVOD services becoming obsolete?

We'll start with the short answer to ease the anxiety: no, probably not.

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But with almost all subscription-based SVOD services posting losses, where does that leave the future of the world's most convenient entertainment?

It's hard to say. The massive surge in subscribers over the past two years can be placed solely at the feed of the pandemic. People locked in their homes due to COVID needed some way to stay sane and entertained, so subscription streaming services upped their game and investing in original content to meet the demand of the market.

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The at-home entertainment industry was suddenly flooded with options, and people were paying to get on board. Now, however, people are going back to work outside of the home, children are returning to school, and streaming companies are left holding the bag with enormous investments made into original content that their users aren't even home to enjoy.

By the end of 2 years of multiple subscription services, most people now know which ones they use the most and which they don't, so people are beginning to pare back what they subscribe to as the economy eyes a possible recession on the horizon. So will SVOD services go the way of Blockbuster rentals? It's unlikely.

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Like many start-up companies, there was a huge boom in both customers and investment, and now they're on the flip side of the boom - but that doesn't make it a bust. The companies struggling will likely cut original content back to more reasonable levels, contract out more content, and find a happier middle ground. Companies like Netflix are perhaps less suited to weather the other side of the boom curve, but Disney is supported by more than just its subscribers and investors - so they have the resources they need to reorganize and come back strong.

Which subscription services will survive the next few years is anyone's guess, but we wouldn't count any of them out quite yet.

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