Disney+ Needs To Become Profitable by 2024: Can The Magic Last?
Way back at the Disney Investor Day in 2019, the company revealed that it wasn’t expecting its new streaming service, Disney+ to make a profit until 2024. Like most businesses, it can take years to make a profit, and while Disney+ burst out of the gate and smashed all expectations for its subscription numbers, it did so during a pandemic, when most of the world was locked away at home, with nothing to do but watch television.
As the effects of the pandemic eased off and people returned to normal, the growth of streaming services stalled, causing Wall Street investors to make a huge pivot in their demands from the Hollywood studios. They were no longer interested in how many subscribers a streaming service had, they wanted the streaming platforms to be making money.
This shift in mentality had huge ripple effects across the studios, which saw billions of dollars wiped off the value of stocks like Disney and Netflix. Focusing on growing subscriber numbers was no longer the main focus for Disney executives. It was now able to get into profit, and it’s been a painful shift. Former Disney CEO Bob Chapek was previously going all in streaming, as he saw it as the future and was pumping billions into creating new content for the platform, in the hope that it would pay off in the end, which is how Netflix had grown to its size, having run at a loss for years.
But with the return of Bob Iger as CEO, following reports of Bob Chapek shifting debt from Disney+ to linear channels to make the streaming service look better for investors, (which has now resulted in a court case), Disney has had to go on major cost-cutting measures across every division. With over 7000 employees being let go, assets being sold, and over $2 billion of original programming removed as an impairment charge to try to get the division in the black. Plus, we’ve seen many projects cancelled or delayed, to help spread out the huge costs of creating original programming.
With 2024 now just a few months away, there is even more pressure on Disney to make sure Disney+ is making a profit, and according to a recent report from the Wall Street Journal, Bob Iger knows that being able to make the company’s goal of streaming profitability by September 2024 is crucial.
We are just days away from another price hike for Disney+, with a huge push to get subscribers to shift over to the ad-supported tier, making Disney much more money per user than those on the ad-free plans. And the idea to merge in Hulu with Disney+, will help with increasing advertising revenue, and reducing running and marketing costs, plus it will likely help with reducing churn. Disney is also planning on launching its ad-supported tier in many countries, including Canada and the UK, in November, with plans to roll it out in as many countries as possible in 2024, to help push the streaming platform to profitability.Disney has also been looking to sell assets that aren’t making as much money as they’d like, including linear channels and some of its businesses in India. They are also going to be cracking down on password sharing, plus, they have even started licensing out content to third parties, in an effort to make sure the entertainment division makes more money. And recently, Disney has started bundling the ad-supported tier of Disney+ in with cable packages, to boost revenue.Unfortunately, for consumers, it means only a few things: more ads, less content and things becoming more expensive. But the days of a cheap Disney+ streaming service are long gone, as it will soon have to stand on its own as a business. Otherwise, we will likely see more changes in the coming years: fewer originals, more advertising, and maybe less magic! What do you think of Disney+ becoming profitable? Let us know on social media!
Roger Palmer
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