The cost of streaming is going up.
Given the changes seen in the entertainment industry since we last looked at the pricing landscape of U.S. streamers in Q1 it should not be surprising that there have been a number of price increases recently. There was already pressure from Wall Street for these companies to make streaming profitable. Now, as the strikes come to an end and it looks like writers and actors will be paid more for their work, the cost of producing content is likely to rise. Consumers should expect to shoulder some of the burden of more expensive content in the form of higher subscription fees.
Before the latest round of price hikes from Disney, Hulu, Disney+ and especially the bundled offering were each priced competitively relative to the competition. Now, after Disney raised the monthly price of ad-free Hulu (a 20% price hike) and Disney+ (up 27%) the standalone platforms look steeply priced compared to other services.
For example, Hulu and Max have nearly the same demand for their on-platform shows and movies but Max costs $2 less per month for its ad-free tier ($15.99). This pricing strategy could be a way to more strongly incentivize subscribers to upgrade to the pricier Disney+/Hulu bundle. This combination provides users with the most in-demand catalog of content among these platforms in the U.S. at a very competitive price.
One of the more aggressive price hikes recently came from Apple TV+ which raised its price from $6.99 to $9.99 at the end of October. This means the subscription price for Apple TV+ has doubled in the span of a year (up from its launch price of $4.99). The total catalog size of Apple TV+ is a fraction of most of these other platforms, which could make it hard to compete for subscribers who value the options that a larger catalog provides.
However, the focus of Apple TV+ on originals, exclusivity, and quality could make up for its smaller streaming catalog. The platform’s strategy of building a catalog of originals means that Apple TV+ is the only place a majority of these titles are available, in theory enabling it to charge a premium. We have shown in the past how Apple TV+ original series tend to attract higher audience demand on average.
Two buzzy awards contenders currently in theaters, “Killers of the Flower Moon ” and “Napoleon,” will stream on Apple TV+ and should bolster the platform’s reputation as a home for quality content. If these factors can keep subscribers sticking around despite the price increases, then Apple TV+ will be enjoying healthier margins because of this decision.
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