Disney CEO Bob Chapek again distances himself from Bob Iger with Disney+ pricing decision

Disney Company Executive CEO Bob Chapek, left, and Bob Iger, executive chairman, remark during the rededication ceremony to mark the 50th anniversary of Walt Disney World in Lake Buena Vista, Florida, at Cinderella Castle in the Magic Kingdom Thursday night, Sept. Huh. 30, 2021.

Joe Burbank | Tribune News Service | Getty Images

Disney Chief Executive Officer Bob Chapek continues to make decisions that distance him from his predecessor, Bob Iger.

as CNBC Reported earlier this year, Iger disagrees with several decisions made by Chapek as Disney CEO, including his restructuring of the company and his handling of Florida’s controversial “Don’t Say Gay” law.

latest break is 38% price hike for Disney+, announced last week As part of several announcements about Disney’s new ad-supported service, which will launch on December 8th. Disney+ without ads will increase from $7.99 per month to $10.99 per month. Disney+ with ads starts at $7.99 per month.

Chapek’s pricing strategy differs from Iger’s philosophy, according to people familiar with both men’s thinking. Iger wanted Disney+ to be the lowest-priced major streaming offering, said the people, who did not wish to be named because discussions were private. As such, customers would see Disney+ as a strong value proposition to their competitors, even if they felt the content on other services could be stronger. That’s why Iger argued for keeping Disney+ separate from Hulu and ESPN+, a strategy that Chapek has maintained until now.

At $7.99 per month with ads, Disney+ will now be more expensive than many other ad-supported products, including NBCUniversal’s Peacock ($4.99) and Paramount GlobalParamount+ ($4.99), though it comes with . will be cheaper than Warner Bros. DiscoveryHBO Max ($9.99). At $10.99, ad-free Disney+ will not only be more expensive than Peacock and Paramount+, but it will be even more expensive heroine Prime Video ($8.99), which also doesn’t include ads.

Disney+ will still cost a lot less without ads Netflix ($15.49) and HBO Max ($14.99). Disney’s bundled offering of Disney+, Hulu with ads and ESPN+ with ads will cost $14.99 per month, a $1 increase from its previous cost.

“We launched at an extraordinarily attractive price across all the platforms we have for streaming,” Chapek said last week. “I think it was easy to say that we are probably the best value in streaming. Since that initial launch, we have continued to invest well in our content. We are confident as the investments increased over the past two years. A year and a half relative to a very good price point that we have a lot of room for at a price point.”

Igar vs Chapeki

People said Iger’s strategy was to raise prices gradually over time, aiming for a $1 per month increase every year for the foreseeable future. That’s what happened in March 2021, when Chapek was CEO and Iger was still in the chair. Disney+ jumped from $6.99 to $7.99. Iger resigned from the Disney chair in December.

Slow price hikes will allow Disney to suck in as many consumers as possible at each price level — $6.99, $7.99, $8.99, etc. — as much as possible. Iger declined to comment about Disney+’s new prices. A Disney spokesperson declined to comment on the differences between Chapek and Iger’s strategies.

Chapek’s decision to rival Disney+ by $3 per month from $7.99 to $10.99 shows that he is shifting Disney’s strategy from maximizing customer growth to emphasizing profitability. The pricing decision goes hand in hand with Chapek’s decision not to pay for the streaming rights of the country’s top cricket league, the Indian Premier League. chapek too Decided to increase the price of ESPN+ by $3 per month from $6.99 to $9.99.

Without the Indian Premier League starting in 2023, Chapek lowers Disney’s guidance, First created in 2020, That Disney+ will have 230 million to 260 million subscribers by the end of 2024. Disney’s new subscriber forecast is 215 million to 245 million by the end of 2024.

During Iger’s last two years in office, in 2020 and 2021, less streaming guidance likely would have led to a decline in Disney shares. Instead, last week, Disney shares barely jumped when CFO Christine McCarthy announced the news on a conference call and Disney’s earnings rise 6% the day after That included a 15 million Disney+ subscriber gain in the quarter.

This change is related to the collective sourness of investors. Netflix This year, that has affected the entire streaming video industry.

netflix effect

Chapek is betting that investors with a small total addressable market of streaming customers are fine if paying customers lead to a profitable business. Disney’s Streaming services lost $1.1 billion in its most recent quarter. Chapek said last quarter that big price hikes should propel the streaming business to profitability by the end of 2024, even as the total number of subscribers remains low. Still, it’s worth mentioning that Disney had already planned to achieve streaming profitability by 2024, even before the price hike.

At the moment, Netflix’s growth tops out at around 220 million global subscribers. Shares are down more than 60% this year after Netflix lost subscribers in the first half of the year and projects to add just 1 million paying subscribers in the third quarter.

The Walt Disney Company CEO Bob Chapek responds at the Boston College Chief Executives Club luncheon in Boston, Massachusetts, November 15, 2021.

Katherine Taylor | Reuters

Netflix’s valuation declines for Chapek and . like gives cover to officers Warner Bros. Discovery CEO David Zaslav will re-prioritize profit more than customer growth.

Disney is also taking steps to show the market that it should now focus on average revenue per user, not just adding Disney+ customers. In a bid to demonstrate a much higher average revenue per user for Disney+, Disney announced a move during its third quarter earnings presentation last week to separate its “core Disney+” customers from its Disney+ Hotstar customers based in India. point made. Average Revenue Per Disney+ Customer Disney’s fiscal third quarter ended $6.29 per month. The ARPU for a Hotstar customer was $1.20 per month.

Disney plans to have between 135 million and 165 million core Disney+ subscribers and “80 million Hotstar” subscribers by the end of 2024.

near term profit