Wall Street likes to see companies with pricing elasticity, so it wasn't a surprise to see the market applauding Walt Disney's (DIS +2.30%) move to jack up prices for its premium streaming services earlier this month. The ad-free Disney+ platform will be getting 38% more expensive in December. Monthly rates for Disney's majority-owned Hulu are also moving higher. ESPN+ pushed out a 43% increase last month.
Disney is taking a big step up when it comes to pricing. Does it realize that many of its competitors are taking a step back? The media giant's confidence is admirable, but it could be dangerous if Disney isn't reading the room -- the living room -- the same way as its peers.
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Changing channels
In their brief histories, Comcast's (CMCSA +1.00%) Peacock TV has't had the same kind of overnight success that Disney+ has achieved. Peacock+ has had a couple of marginal hits with Dr. Death and Bel-Air, but like most platforms outside of Disney and Netflix (NFLX 9.71%), Comcast is just trying to stand out to show off its feathers to a larger audience. Peacock+ had 13 million paid subscribers at the end of June, flat with where it was three months ago.
Comcast knows it needs to increase its user base quickly, and it's taking an aggressive approach to locking in more viewers. On Sept. 1, Peacock+ will offer a year of the ad-supported version of Peacock Premium for just $19.99. The monthlong promotion is a 60% discount from the current $49.99 annual price.
Peacock isn't the only platform giving its users a cheaper option. Netflix is working on an ad-supported version of its industry-leading service. After back-to-back quarters of declining subscriber counts, it's starting to realize that it may have gone too far with its latest price hike earlier this year. Last week, Walmart (WMT +2.19%) announced that members of its Walmart+ premium member loyalty program will have access to Paramount Global's (PARA +0.00%) Paramount+ Essential -- a $59 value -- at no additional cost. Despite separating from AT&T (T +0.47%) earlier this year, Warner Bros. Discovery (WBD +0.29%) announced in its latest earnings call that it has extended its deal to continue offering HBO Max to folks with high-tier AT&T wireless plans at no cost.
It's been a summer of deals and alliances, and they all translate to cheaper prices for consumers wanting access to streaming entertainment. Is Disney+ making a big mistake?
The brazen move makes sense from a momentum perspective. Disney's three premium services have soared in popularity over the past year, combining for 221.1 million subscribers at the end of June. Its peers are seeing their audience counts stall if not retreat. With a shakeout potentially looming, many of the smaller players are getting desperate. They're willing to sacrifice profits in the land grab, but will it be enough?
We won't know if Disney went too far until early next year, when we'll start seeing the impact of the increases across all three of its "plus" platforms. It now has more subscribers than Netflix, even if it generates a lot less revenue per user. Disney has emerged as a force in streaming media stocks, and Disney+ hasn't even turned three. It seems like a daring move in a climate where inflationary pressures are keeping consumer spending on non-essentials in check, but there's a lot to gain if Disney can somehow pull this off in this challenging climate.
