Disney CEO Chapek distances himself from Iger with Disney+ pricing decision
Disney Co. CEO Bob Chapek, left, and Bob Iger, executive chairman, speak at Cinderella Castle in the Magic Kingdom during a ceremony marking the 50th anniversary of Walt Disney World, in Lake Buena Vista, Florida, Thursday night, September. 30 year 2021.
Joe Burbank | Tribune News Service | beautiful pictures
Disney CEO Bob Chapek constantly makes different decisions than his predecessor Bob Iger.
Like CNBC reported earlier this year, Iger disagreed with a number of decisions Chapek had made as CEO of Disney, including the reorganization of the company and its handling of the controversial “Don’t Say Gay” law. Florida.
The most recent vacation was 38% price increase for Disney+, announced last week as part of a series of announcements surrounding Disney’s new ad-supported service, which will launch on December 8. Disney+, ad-free, will increase from $7.99 per month to $10, $99 per month. Disney+ with ads will start at $7.99 per month.
Chapek’s pricing strategy differs from the philosophy that Iger espouses, according to people familiar with the male mindset. Iger wants Disney+ to be the lowest-priced major streaming service provider, the people who requested anonymity said because the discussions are private. That way, customers will see Disney+ as a stronger value proposition than competitors, even if they feel other services’ content could be stronger. This is also why Iger argued to keep Disney+ separate from Hulu and ESPN+, a strategy Chapek has maintained to this day.
At $7.99 per month with ads, Disney+ will now be more expensive than some other ad-supported products, including NBCUniveral’s Peacock ($4.99) and Paramount Globalby Paramount+ ($4.99), although it will still be cheaper Discovery of Warner Bros.HBO Max’s ($9.99). At $10.99, Disney+ without ads will not only be more expensive than Peacock and Paramount+, but also more expensive Amazon Prime Video ($8.99), which also doesn’t include ads.
Disney+ without ads will still have significant discounts Netflix ($15.49) and HBO Max ($14.99). Disney’s offering of Disney+, Hulu with ads, and ESPN+ with ads, will be $14.99 per month, a $1 increase from the previous cost.
“We’re rolling it out at an incredibly attractive price across all the platforms we have for streaming,” Chapek said last week. “I think it’s easy to say we’re probably the best value in streaming. Since that first launch, we’ve continued to invest heavily in our content. trust because of the increase in investment over the last two years a year and a half compared to the very good price we have a lot of room for value.”
Iger vs. Chapek
Iger’s strategy is to slowly increase the price over time, aiming to increase it by $1 a month per year for the foreseeable future, these people said. That’s what happened in March 2021, when Chapek was CEO and Iger was still chairman. Disney+ went from $6.99 to $7.99. Iger stepped down as chairman of Disney in December.
Slow price increases will allow Disney to attract as many consumers at each price point – $6.99, $7.99, $8.99, etc – as possible. Iger declined to comment on the new Disney+ pricing. A Disney spokesperson declined to comment on the differences between Chapek and Iger’s strategies.
Chapek’s decision to increase Disney+ by $3 per month, from $7.99 to $10.99, shows that he is shifting Disney’s strategy from maximizing subscriber growth to emphasizing profit. . The pricing decision goes hand in hand with Chapek’s decision not to pay for the streaming rights of the Indian Premier League, the country’s top cricket league. Chapek also decided to increase the price of ESPN+ by $3 per month, from $6.99 to $9.99.
There is no Indian Premier League, starting in 2023, Chapek downplayed Disney’s guidelines, for the first time in 2020, that Disney+ will have 230 million to 260 million subscribers by the end of 2024. Disney’s forecast for new subscribers by the end of 2024 is 215 million to 245 million.
During the last two years of Iger’s tenure, in 2020 and 2021, the drop in streaming guidance will likely send Disney shares plummeting. Instead, Disney stock barely moved last week when Chief Financial Officer Christine McCarthy announced the news on a conference call and up 6% a day after Disney earnings, which includes 15 million Disney+ subscribers during the quarter.
The change is related to the collective souring of investors Netflix This year, this has affected the entire online video industry.
Netflix effect
Chapek is betting that investors will agree to a smaller total solvable streaming subscriber market if paying customers leads to a profitable business. Disney’s streaming services lose $1.1 billion in its most recent quarter. Chapek said last quarter that the big price increase would make the streaming business profitable by the end of 2024 even if total subscribers were lower. It’s worth noting, however, that Disney previously planned to reach profitability online by 2024 even before the price hike.
Currently, Netflix’s growth has topped with around 220 million global subscribers. Shares have fallen more than 60% this year after Netflix lost subscribers in the first half of the year and expects just 1 million more paying customers in the third quarter.
The Walt Disney Company CEO Bob Chapek reacts at the Boston College Executives Club luncheon in Boston, Massachusetts, November 15, 2021.
Katherine Taylor | Reuters
Netflix’s slumping valuation creates a cover-up for executives like Chapek and The CEO of Warner Bros. Discovery, David Zaslav to rearrange profits exceed subscriber growth.
Disney is also making strides to show the market that it should focus on average revenue per user now, rather than just adding Disney+ subscribers. Disney made the point during its Q3 earnings presentation last week when it separated “Disney+ core” subscribers from Disney+ Hotstar, India-based subscribers, to showcase mid-range revenue. much higher average per user for Disney+. The average revenue per Disney + subscribers was $6.29 per month at the end of Disney’s third fiscal quarter. ARPU for a Hotstar subscriber is $1.20 per month.
Disney plans to have 135 million to 165 million core Disney+ subscribers by the end of 2024 and “up to” 80 million Hotstar customers.
Short term profit
By pricing Disney+ with ads at $7.99, the current price of Disney+, Chapek is favoring a higher ARPU over accumulating data on how many customers might be willing to pay Disney+ with a lower price will not register at $7.99. Chapek seems to be aware of the Disney+ market for $7.99 in the US and Canada, since that’s the current Disney+ price.
One of Iger’s other motivations to compete under price with incremental increases is that Disney is able to capture demand trends well as it increases Disney+ by $1 per month per year, according to a person familiar with the matter. this topic.
Chapek can see how many subscribers will be interested in Disney+, say, $4.99 per month, if he offers a starting price with ads. His decision to start at $7.99 again shows that he’s more interested in short-term profits than rapid subscriber growth that can turn into higher paying customers over time.
It also shows that he is confident that the price increase will not causing Disney+ demand to drop.
“We don’t believe there will be any meaningful long-term impact on our business,” Chapek said.
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