Disney-owned Hulu has increased the subscription cost of both its ad-free and ad-supported tiers by $1 each to $12.99 and $6.99 per month, respectively. The price hike does not impact the Live TV version of Hulu ($65 monthly), but the company’s on-demand services account for a majority of its business, having grown 22% year-over-year. As Disney doubles down on its streaming business, this new Hulu price hike is the third such price increase for customers in 2021 – Disney+ raised its subscription price by $1 to $7.99 back in March, while ESPN+ went up by $1 as well to $6.99 in August.
Incremental price increases in the highly competitive streaming business are nothing new. Companies are investing massive dollar amounts to secure original and/or exclusive content and that heavy cost is ultimately subsidized by subscribers. In Disney’s case, however, it’s likely that the company is aiming to push more of its base towards the Disney bundle, which includes Disney+, Hulu (with ads), and ESPN+ for just $13.99 per month. With Hulu’s newest price hike, the bundle looks like an attractive option for many, especially viewers who like sports. ESPN+ has been spending heavily to snag exclusive sports rights for games across the NHL, NFL, and MLB.
Disney CEO Bob Chapek remarked during an earnings call in August that a “good chunk of our marketing now is going toward the bundle.” He also noted that the company’s churn rates across streaming services are “extremely low” but the churn rates on the Disney bundle “are even lower — surprisingly low even for us.” Disney+ is still the company’s belle of the ball, with 100% year-over-year growth as the service hit 116 million subscribers as of Q3 2021, but the more subscriptions the company can attract its customers to the better it will be for the long-term bottom line.
According to Interpret’s VideoWatch™, Disney+ and Hulu both are ahead of Amazon Prime Video and Apple TV+ in the US when it comes to cancellations due to price increases. Subscriber growth will continue to be driven by fresh content like Nine Perfect Strangers, Only Murders in the Building, and Vacation Friends, but Disney may be carefully considering its Hulu strategy as the streaming platform just experienced an executive shakeup as well.
