• by Karlene Lukovitz  @KLmarketdaily, August 11, 2023

Netflix’s so-far positive results from cracking down on password sharing appear to be encouraging other major streaming players to follow suit. 

During Disney’s earnings report on its fiscal Q3 this week, CEO Bob Iger said that addressing account sharing is a “real priority” for the company. 

“We are actively exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and family,” Iger said. “Later this year, we will begin to update our subscriber agreements with additional terms on our sharing policies, and we will roll out tactics to drive monetization sometime in 2024.”

Disney already has the technical capability to monitor “much of” the password sharing, Iger added in a Q&A with analysts. “And I'm not going to give you a specific number, except to say that it's significant. What we don't know, of course, is as we get to work on this, how much of the password sharing as we basically eliminate it will convert to growth in subs. Obviously, we believe there will be some, but we're not speculating.

“What we are saying, though, is that in calendar 2024, we're going to get at this issue… so you’ll see some impact [in 2024, but] it's possible that the work will not be completed within the calendar year.”

Following its crackdown on account sharing in May, Netflix reported adding 5.9 million subscribers globally in Q2. However, revenue and profits each increased only about 3%, and subscription cancels are resulting in relatively little upside for its total viewer number, according to the latest global Entertainment on Demand study from Worldpanel. In addition, planned cancellations within Netflix’s U.S. subscriber base rose to 5% in the second quarter, from 4% in Q1, per that study. 

But as Iger’s remarks underscore, achieving modest net subscriber growth -- or even stasis -- while achieving higher ongoing consumer-driven, and ad-driven, revenue would represent a coup for entertainment companies now focused on improving the bottom lines of their streaming businesses. 

Disney+ lost 11.7 million subscribers in the latest quarter. But only 1% were domestic; 24% came from India's Hotstar, which has such a low average revenue per subscriber (ARPU) that the losses were not financially material, the company said.

It was the second quarter in Disney+'s history to see subscriber losses -- but Disney advanced its goal of getting its streaming business in the black, narrowing its losses significantly, to $512 million, versus $1.1 billion in the year-ago quarter.

Disney’s recent, aggressive increases in its ad-free streaming subscription prices speak to its push for higher revenue per subscriber and margins in these plans, while driving scale and ad revenue for its ad-supported plans by incentivizing signups to these with substantially lower prices.   

Disney hiked the price of the Disney+ no-ads plan by $3, to $10.99, in conjunction with the December 2022 introduction of the Disney+ with-ads tier, and will up it by another $3 in October, to $13.99. Hulu is also getting a $3 hike in October, to $17.99. At the same time, Disney is looking to maximize bundling leverage with a new deal offering ad-free Disney+ and ad-free Hulu for $19.99 per month. 

Meanwhile, prices for the Disney+ and Hulu ad-supported plans remain unchanged, at $6.99 and $7.99 per month, respectively. 

With the introduction of Disney+’s ad-supported plan in Canada and major European markets (U.K., France, Germany, Switzerland, Italy, Spain, Norway, Sweden and Denmark) on Nov. 1, Disney may opt to increase sub prices in some or all of those markets, as well, although no such plans have been indicated.