You haven't been paying a fair price for your streaming services. Warner Bros. Discovery CFO says: 'I think that's in the process of being corrected'
- A change may be coming to your streaming services, Warner Bros. Discovery CFO said.
- The services have been undervalued, Gunnar Wiedenfels said, and "quality content has been given away"
You've been getting a really good deal on your streaming services — and it may not last too much longer — Warner Bros Discovery's CFO said.
"For a decade in streaming, an enormously valuable amount of quality content has been given away well below fair market value, and I think that's in the process of being corrected," Gunnar Wiedenfels said at the Bank of America Securities Media, Communications & Entertainment Conference last week. "We've seen price increases across essentially the entire competitive set."
Wiedenfels noted what has become more and more evident to Hollywood in the last couple of years: The streaming model — as pioneered by Netflix and adopted by the likes of Hulu, Disney+, and Max — was never meant to last.
For years, the platforms offered libraries of content, including content that was very expensive to produce, for relatively low prices in the hopes of achieving subscriber growth.
As Insider's Matt Turner summed up: "Streaming services have been underpriced in the name of attracting critical mass."
It worked: Netflix currently has 238 million subscribers, while Disney+ has 146 million.
But profits have lagged. Disney's direct-to-consumer offerings, which include Hulu and Disney+, reported a loss of $2.2 billion for the nine months ending in July. Paramount's DTC business, including Paramount+, lost $424 million last quarter, while Comcast's Peacock lost $651 million. Warner Bros Discovery posted a $3 million operating loss from its DTC segment in its latest earnings report.
Netflix has been an anomaly in the streaming market in its ability to record a profit.
The solution, Wiedenfels said, will likely be to increase prices — a move a number of streaming giants have already started taking.
The combined price of the major players in the space — Disney+, Hulu, Netflix, Max, Peacock, Paramount+, and Apple TV+ — grew from $76.43 a month to $94.43 a month in the past year, according to analyst Mark Schilsky, a sales specialist at Bernstein Research. This price shift represents a 24% increase, compared to a roughly 3% increase in US consumer prices generally.
In January, Warner Bros Discovery increased the price of an ad-free subscription to HBO Max for the first time since its launch in 2020. This increase arrived before HBO Max and Discovery+ merged to form Max, which costs $15.99 per month for an ad-free subscription.
Next month, both Disney+ and Hulu's ad-free tiers will experience price hikes, going from $10.99 a month to $13.99 per month and $14.99 to $17.99, respectively.
"In our zeal to grow global subs, I think we were off in terms of that pricing strategy, and we're now starting to learn more about it and to adjust accordingly," Bob Iger, the CEO of Disney, told The Wall Street Journal in March.
"I don't think these companies are done raising prices," Schilsky told Insider.
Aside from boosting prices, services are also cracking down on password sharing.
In May, Netflix rolled out its new password-sharing policy, charging subscribers $8 to add an extra user to their accounts. Disney+ is similarly looking to crack down on password sharing, with Iger saying on an August earnings call that the company is "actively exploring ways to address account sharing."
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