Disney Challenge: Stream for $19.99

Walt Disney (NYSE: DIS) has increased the prices of most of its streaming packages. For instance, the company’s “Duo Premium” bundle, which includes Disney+ and Hulu without advertising, now costs $19.99. In comparison, a similar package from Netflix (NASDAQ: NFLX) is priced at $15.49. It’s uncertain whether consumers are comparison shopping among streaming services based on price, but there is a threshold where these services might be deemed too expensive.

According to survey firm Antenna, the monthly churn rate across the industry is 5.5% for “premium streaming services.” A significant challenge facing the sector is from “serial churners,” users who have canceled more than three services in the past two years. These serial churners constitute 23% of users but account for 40% of canceled subscriptions.

Churn rate is particularly damaging to streaming revenue. Whenever a subscriber leaves, they need to be replaced to maintain current levels of growth. Until that happens, the service can’t grow by adding new subscribers. This issue affects both the top and bottom lines of streaming companies. Disney’s stock continues to struggle amidst these challenges.

After incurring billions in losses, Disney’s streaming business finally made a small profit last quarter. However, unless these profits increase at an extraordinary rate, Disney might not recoup its investment for another decade. For this improvement to occur, Disney needs industry-leading churn figures and the ability to raise prices simultaneously—an exceptionally difficult feat.

Source: 247 Wall St