Streaming platforms are finally starting to deliver profits for media companies, but this shift comes with a notable increase in subscription costs for consumers. As traditional cable TV subscriptions wane, legacy media companies like Disney and Warner Bros. Discovery have pivoted to streaming, initially focusing on subscriber growth to compete with leaders such as Netflix. Now, these companies are shifting strategies towards achieving profitability.
To boost their bottom lines, media companies are employing several tactics, including introducing lower-cost, ad-supported tiers, launching bundled services, and tightening controls on password sharing. However, price hikes have proven to be the most immediate and effective method for increasing revenue.
“The era of prioritizing user growth through low prices is over,” stated Mike Proulx, vice president and research director at Forrester.
Disney recently reported its streaming services—Disney+, Hulu, and ESPN+—achieved profitability for the first time in its fiscal third quarter, primarily due to price increases. CEO Bob Iger defended the price hikes, attributing them to the company’s creative output and product enhancements, and indicated that past increases had not led to significant subscriber losses.
In recent months, major streaming platforms have implemented several price increases. Disney has raised prices for Hulu, Disney+, and ESPN+ by $1 to $2 per month. Paramount Global announced that its streaming service Paramount+ has reached profitability, with a 26% increase in global average revenue per user, partly due to a price increase.
Similarly, Warner Bros. Discovery and Comcast’s Peacock have both raised prices for their streaming services in recent months. Warner Bros. Discovery’s Max saw a $1 increase for its ad-free tier, while Peacock’s ad-supported tier also experienced a $2 increase this summer.
According to Hub Entertainment Research, 90% of consumers feel that streaming services are raising prices more frequently than before. Forrester’s Proulx notes that while user growth and ad revenue contribute to profitability, the burden of sustaining revenue growth increasingly falls on consumers, who are now facing more frequent and substantial price hikes.
