Someone has to pay for all that content — and that someone is probably you, the customer. If Disney wants to achieve its forecast of hitting profitability in fiscal 2024, it has to raise prices.
It said it will do that in March. And, after that, it’ll likely have to do it again.
“Increasingly streaming, in general, is taking a greater share of the consumer’s wallet,” Bernie McTernan, a senior analyst at Rosenblatt Securities, told CNN Business.
Take HBO Max, for example.
But if it becomes a permanent strategy, consumers will likely see their subscription prices rise over the next few years. Producing a major blockbuster like “Wonder Woman 1984” isn’t cheap.
McTernan pointed out that the company’s outpouring of content could also lead to a streaming arms race.
“Disney increasing its content budget is a big deal for the whole industry, including Netflix. It is effectively raising the bar to compete,” he said. “If Disney needs to spend $14 billion to $16 billion on content, then Netflix likely needs to spend well over $20 billion to achieve the same subscriber scale globally.”
Netflix has become the market leader not just by being first but also producing great content at an affordable monthly price. It did so by taking a ton of debt to finance the service’s seemingly never-ending carousel of content.
If it wants to maintain its throne as the king of streaming, Netflix must keep its content enticing to customers who now have many services to choose from.
“The pressure on Netflix to compete with content is tremendous,” Trip Miller, a Disney investor and managing partner at Gullane Capital Partners, told CNN Business. “Netflix lacks the cross-generational legacy content of Disney.”
The pandemic may have “accelerated subscriber adoption beyond expectations so far,” Miller added, but he believes that will continue even after the pandemic comes to an end.
“Streaming is not a fad. It is here to stay,” he said. “For the consumer, the cost of doing business with, say, Disney is going up, but in return, the amount of content they will receive is increasing.”
Although streaming prices will likely continue to rise, many consumers will pay up. But they might rework their entertainment budgets by siphoning money from other expenses, such as cable.
Read More News: Streaming is about to get a lot more expensive
