Streamers Are Asking Customers to Pay More for Less Content; Will That Strategy Pay Off?

The bill has come due for all those years of cheap, commercial-free streaming. Disney just announced that its latest wave of price increases (its second in nine months) is on the way for Disney+, Hulu and ESPN+, as the company attempts to wring more money out of its customers in order to help it stem losses from the streaming segment of its business.

Writing for Puck News, Parrot Analytics’ director of strategy Julia Alexander said that she believes that Disney's streaming customers will probably stick by the company once those price increases are put into effect in October. Disney+ has one of the lowest churn rates of any streamer, and the Disney Bundle — which allows customers to receive discounts when signing up for more than one service — has the lowest churn rate of all streaming services in the United States, showing that price increases likely won’t lead to a huge exodus of users.

Alexander also points out that Disney has a problem on its hands as it tries to follow the playbook that Warner Bros. Discovery used to pare down losses from its own streaming segment. Disney has recently been following its rival’s plan step-by-step, including some high-profile content removals from Disney+ and Hulu. The issue is that amidst those removals, Disney’s biggest franchises (Marvel and Star Wars) are garnering less interest than they used to, and the company hasn’t developed any other successful big-name IP in recent years.

What that’s led to at Disney, and around the streaming industry in general, is a reduction in content available to users who are now being asked to pay more for their services. The cost of ad-free streaming has risen 25% industry-wide over the last year, and streamers like Paramount+ and Max have also engaged in heavy content cuts in that time.

It’s certainly worth wondering how long users will put up with the trend of being asked to pay more to watch less. With Hollywood writers and actors currently on strike, other streaming providers may find they’re in the same boat as Disney: they don’t have enough originals in the pipeline, and their library content isn’t helping them raise engagement levels. Those issues are only exacerbated by the fact that streaming expenses are now on par with those of cable.

To be sure, not all streaming shows drive engagement on platforms, and it’s true that there is more content out there than customers can reasonably watch all at once. But streaming providers are still running a risk by cutting down on content offerings while raising prices at the same time, most notably that customers will just start signing up for short-term periods to watch a single show, then cancel before being billed next instead of paying $50+ per month to stay subscribed to streaming services they don’t watch daily.

There is also at least some method behind the madness of cutting content while raising prices for ad-free streaming. Platforms are trying to drive customers to cheaper, ad-supported tiers which generate higher revenue per user than ad-free streaming plans do. But it’s still a dangerous game to play, particularly at a time when the WGA and SAG-AFTRA strikes might cause a dearth of scripted streaming originals this fall.