How the streaming era is squeezing both consumers and media giants
Streaming services are at a precarious point where they're squeezing both consumers' wallets and media companies' bottom line.
Why it matters: That tricky position comes as the companies are trying to reach lofty profit deadlines after having bet the farm on streaming. Hiking the price of the service would surely help earnings.
- But doing so while inflation is pressing its thumb on spending habits risks the loss of consumers who would rather cancel than pay more.
Driving the news: Disney is increasing the price of ESPN+ next month by $3 a month, from $6.99 to $9.99. That's a 43% increase, making it Disney's second-most expensive streaming service behind Hulu's ad-free option (and, yes, more expensive than Disney+).
- The price hike does not affect the cost of the "Disney Bundle," which includes Hulu and Disney+.
- Regional sports networks like Massachusetts-based NESN and Sinclair's cadre of local sports stations are getting into streaming and charging higher prices compared to more general entertainment streamers, betting that sports-crazed fans are willing fork over more money than the average consumer.
- It's a dangerous game.
The big picture: For years, investors rewarded companies launching into streaming, bullish that it was the way of the future.
- In 2022, however, investor confidence has waned amid stalled growth and, in some cases, declining subscribers. That's come as financial hits have piled up.
- Disney's direct-to-consumer segment took a $887 million operating loss last quarter, roughly $600 million more than the same quarter the prior year. That is mostly due to increasing content budgets, particularly the price for live sports rights.
What's next: The streaming industry will be holding its breath as Netflix kicks off another round of media earnings Tuesday afternoon, where it is expected to bleed another two million subscribers.
- Netflix will join Disney+ later this year in launching a cheaper, advertiser-supported option as another way to wring streaming profits out of a slowing market.