Disney is pulling Hulu tighter into the Mouse House.
On Disney’s earnings call Wednesday, CEO Bob Iger said the company will soon launch a “one-app experience” in the U.S. that incorporates Hulu content into Disney+. The new combined offering will launch by the end of 2023, available to customers who subscribe to both streaming services, he said.
“While we will continue to offer Disney+, Hulu and ESPN+ as standalone options, this is a logical progression of our [direct-to-consumer] offerings that will provide greater opportunities for advertisers while giving bundle subscribers access to more robust and streamlined content, resulting in greater audience engagement and ultimately leading to a more unified streaming experience,” Iger said.
Iger also said that Disney intends to raise the price of the regular Disney+ tier without ads (currently $10.99/month on a standalone basis) in order to “widen the delta” relative to the ad-supported plan ($7.99/month). In the U.S., the company increased the price of Disney+ without ads in December 2022 by $3, when it introduced the ad tier at the lower price point. “We plan to set a higher price for [the Disney+] ad-free tier later this year to better reflect the value of our content offerings,” Iger said on the call. The service’s net loss of 4 million subs in the first three months of 2023 “was relatively small” and has led Disney “to believe that we, in fact, have pricing elasticity,” he said.
The company’s announcement to more tightly weave Hulu into Disney+ is a sign that Disney intends to retain its ownership of Hulu, in which Comcast holds a 33% stake.
Iger, on the earnings call, said “it has not really been fully determined” what will happen with Hulu but he said that it’s clear that the content on Disney+ combined with “general entertainment content” is a very strong proposition. “So where we are headed is for one experience, with general entertainment content on Disney+,” he said. “If, ultimately, Hulu is that solution… we’re bullish about that.” But Iger declined to predict how the negotiations for Hulu will turn out. To date, Disney has had “constructive” talks with Comcast about the future of Hulu, according to Iger.
Starting in January 2024, Disney can require Comcast to sell its stake in Hulu (and Comcast can force the sale). Iger has saidDisney is evaluating all options. The streaming landscape “is very, very tricky right now and before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go,”Iger said at an investor conference in March.
Under the terms of the Disney-Comcast deal for Hulu, the “guaranteed floor value” of Hulu is $27.5 billion, meaning Comcast’s stake is worth a minimum of about $9.2 billion.
Disney already offers a price-discounted bundle of Disney+ and Hulu with ads for $9.99 per month, but customers must use separate apps to stream each one. In addition, the company offers Disney+, Hulu and ESPN+ bundles for $12.99/month (with ads) and $19.99/month (no ads on Disney+ or Hulu).
Also on the earnings call, CFO Christine McCarthy said Disney intends to produce lower volumes of content for streaming content -- and that it will be removing certain content from its streaming services as it looks to improve profitability. Disney expects to take a write-down in its fiscal Q3 of $1.5 billion-$1.8 billion from removing the content, McCarthy said.
Disney+ shed 4 million subscribers in the first three months of 2023, its second consecutive quarterly drop, to stand at 157.8 millionworldwide. Hulu gained 200,000 net new subscribers in the quarter to reach 48.2 million, and ESPN+ increased by 400,000 to 25.3 million.
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