You may not have Thursday marked on your calendar, but there's a fair chance that executives at Walt Disney (DIS 2.46%) have blisters on their fingers from circling Dec. 8 in recent weeks. Big changes are coming to two of the media mogul's fastest-growing businesses -- Disney+ and Disney World -- this week.
The House of Mouse is rolling out a new advertising-backed tier for Disney+. The move also coincides with a 38% increase in pricing for its original ad-free streaming service. A day at Disney World will also likely be more expensive come Thursday. The leading theme park operator is raising single-day tickets by as much as 19%.
There's obviously a lot riding on how well these increases are received by Disney's audience. Let's take a closer look.
It's a small world with a big price
It's definitely not a Throwback Thursday at Disney this week. Cover charges for streamers and dreamers are on the rise. The timing isn't ideal, with many economists forecasting an economic slowdown in the months ahead, but it doesn't mean that the entertainment giant is going to fail.
Let's start with Disney+ going from $7.99 to $10.99 a month. It will still be cheaper than the some multi-user family plans. Cord-cutting Disney enthusiasts aren't going to go back to cable or satellite TV over a $3 increase. However, there will undeniably be some degree of churn here. If you're in a home that isn't regularly spending time on the platform, it becomes an $11 question instead of a $3 question.
Image source: Disney.
The interesting wrinkle here is the launch of the ad-saddled tier. Disney also has a controlling stake in Hulu, where most users have opted for the cheaper plan that includes ads. If you want to keep paying just $7.99 a month -- the price of the new plan with sponsored interruptions -- you can have your cake and stream it, too.
We know Disney won't have a problem monetizing those slots for commercials. It has been filling up ad breaks for decades at ABC, ESPN, and some of its other cable properties. Marketers should also pay a premium to reach Disney families. The two big questions here are how far will the subscriber count fall in the aftermath of Thursday's moves and can Disney get folks to spend more time on the platform to maximize the the number of ads viewers consume.
The theme parks move is a bit more risky. Disney World is going back to a model it was working with before the pandemic, where each of its four gated attractions in Florida commands a new price point. There is already seasonal pricing baked into the turnstile taps. A one-day ticket will cost a guest between $109 to $159. On Thursday, the pricing will change for three of the resort's busiest theme parks. Disney's Animal Kingdom will remain the same, but the rest of the Disney World parks will see single-day passes start at $114 to $124 during the slow season, peaking between $179 and $189 over holiday periods.
We're all paying more for things these days, but there's a significant difference between paying $159 for a day at the Magic Kingdom later this month and $189. One can argue that park-based pricing was in place before the COVID-19 crisis temporarily shut down Disney attractions worldwide, but we've already seen per-capita revenue surge 40% since 2019 at the domestic theme parks. Throw in a rising dollar that will impact international visits and the softening global economy, and this could be a tipping point. Most annual pass prices are also moving higher on Thursday.
So, yes, Thursday is a pretty big deal for the media stock bellwether. Everyone's still buzzing favorably over the recent return of Bob Iger as CEO, but don't spend too much time looking back. You're still moving forward. You might miss the heavier tollbooth bar that can smack you in the face.
