Streaming media is becoming increasingly expensive for consumers. that’s why | Wilnesh News

Streaming is finally starting to pay off for media companies, but there’s a catch — to get there, consumers will face higher subscription costs and increasingly frequent price increases.

Traditional media companies enter streaming market with focus on winning subscribers and competing with category leaders Netflix Losing customers due to traditional cable TV packages. Now, in search of a return on investment in content, disney, Warner Bros. Discovery Others aim for fluency.

Their strategy includes launching cheaper, ad-supported models; rolling out platform bundles; and cracking down on password sharing, but the price increases have had a more direct impact on profits.

“The days of prioritizing user growth over low price are over,” said Mike Proulx, vice president and research director at Forrester.

Disney said last week that its combined streaming services — Disney+, Hulu and ESPN+ — turned a profit for the first time in its fiscal third quarter. Although the company added new subscribers, this milestone was primarily due to price increases.

CEO Bob Iger said on an earnings call that Disney “won” pricing in the market due to the company’s creative contributions and product improvements. He noted that with past price increases, the company hasn’t seen a “significant” loss of customers.

“When we look at our portfolio … we see growth in consumption and the popularity of our products, which gives us the pricing leverage we think we have,” Iger said.

The major streaming services have gone through many price increases and changes over the past few years.

In the past five months, four streamers have announced price increases: Warner Bros. Discovery Max, Comcast Peacock, Disney and Paramount.

As of February last year, 75% of subscribers were in the ad-supported tier, according to Peacock Antenna research. At the time, it had the largest share of all major streamers, followed by Hulu (57%) and Paramount+ (43%). Streaming companies don’t typically disclose subscription breakdowns by tier.

Tim Nolen, senior media technology analyst at Macquarie, said: “For all of these companies, the ad tier is attractive because the revenue they make from ad revenue is not the same as the revenue they make from ad tier subscription fees. The income is the same.

Netflix executives were once dissatisfied with advertising, but turned to transformation after user growth slowed in 2022. The company also recently eliminated its cheapest, ad-free Basic plan — giving consumers access to choose One ad-supported option for $6.99, or two ad-free plans for $15.49 or $22.99.

Netflix co-CEO Ted Sarandos said on the company’s second-quarter earnings call that the advertising tier makes Netflix more accessible to users due to the lower entry price. Sarandos said that for both tiers, in raising prices, Netflix aims to increase value and engagement before making subscribers pay more.

Generally speaking, price-constrained streaming consumers are willing to tolerate ads in order to pay lower subscription fees, according to Forrester research. Still, ad tiers aren’t immune to price increases. For example, Disney+ is now increasing the price of its ad-supported plan.

Disney is taking a unique approach by launching its ad tier in December 2022, giving existing subscribers the option to pay an extra $3 per month or accept ads. According to Antenna, nearly 95% of Disney+ Premium subscribers pay to maintain ad-free streaming.

Warner Bros. Discovery said on an earnings call that it lost fewer customers than expected in July after raising the price of its ad-free streaming service by $1.

“Disney (and others) will continue to raise prices until there is a mass exodus of users,” Proulx said.

Jon Giegenack, founder of Hub Entertainment Research, said there’s one key thing that plays to the strengths of streaming: Across platforms, users are generally unwilling to sacrifice the content they want, even as costs rise.

However, Proulx said the total cost of streaming can sometimes exceed the cost of cable TV for some consumers because the content they consume is spread across different platforms.

In response, companies including Disney, Paramount and Warner Bros. Discovery have turned to bundling their services into a single, discounted offering. Proulx said that at a time when streaming is no longer cheaper than traditional TV, bundling services can allow consumers to save money while accessing TV content across different services.

Nolen said bundled subscriptions are an opportunity for providers to increase revenue because they expect fewer people to cancel bundled subscriptions than individual subscriptions.

“The new world of streaming is not as profitable as the old world of pay TV,” Nolen said. “Everyone has realized this and they are looking for ways to at least try to improve their fortunes, and bundling is one of them.”

Streamers also increase their user base by cracking down on password sharing. last year, Netflix Members are reminded that accounts can only be shared within one household, Disney has done something similar announcement earlier this year. Warner Bros. Discovery Channel will soon follow.

Still, Giganjak pointed to broader streaming competition as consumers continue to face rising subscription costs. While lower subscription prices initially helped other streamers add subscribers, he said they were unable to continue doing so.

“So far, the amount people can pay, the amount of content they’re getting, it’s been a really good deal, and I don’t think it’s sustainable,” Giganjak said.

Revealed: Comcast owns NBCUniversal (parent company of CNBC) and is a co-owner of Hulu. NBCUniversal also owns NBC Sports and NBC Olympics, the U.S. rights holder for all summer and winter Olympics through 2032.