The cost of streaming is increasing for consumers.

• Disney, Warner Bros. Discovery, Paramount Global, and Comcast, all legacy media companies, initially entered the streaming market with the goal of acquiring subscribers. However, their current focus is on generating a return on their investments.
• Their strategies include cheaper, ad-supported models, platform bundles, and a crackdown on password sharing. Immediate results toward profitability have been shown by price hikes.
• That means consumers are facing higher subscription costs with increasingly frequent price hikes.

Media companies are beginning to see the benefits of streaming, but consumers are facing higher subscription costs and more frequent price increases in order to access it.

In an effort to recoup their investments in content, legacy media companies such as and are now focusing on generating profits through streaming services, as traditional cable TV subscriptions decline.

To increase profitability, their strategies involve introducing lower-cost, ad-supported models, offering platform bundles, and enforcing strict password sharing policies.

Mike Proulx, vice president and research director at Forrester, stated that the focus on user growth through low prices has come to an end.

During its fiscal third quarter, Disney's combined streaming services, Disney+, Hulu, and ESPN+, turned a profit for the first time. While the company gained new subscribers, this achievement was mainly due to price hikes.

During an earnings call, CEO Bob Iger stated that Disney has "deserved" its pricing in the marketplace due to its creative contributions and product enhancements. He pointed out that despite past price hikes, the company hasn't experienced a "substantial" number of customers leaving.

Iger stated that our portfolio's growth in consumption and popularity of offerings provides us with the pricing leverage we believe we have.

Climbing prices

In recent years, there have been several price increases and modifications among the leading streaming platforms.

In the past five months, four streaming services have announced price hikes: Max from Warner Bros. Discovery, Peacock, Disney, and Paramount.

Disney announced a rise in streaming prices for Hulu, Disney+, and ESPN+ prior to earnings.

Last week, Disney announced that its streaming business, primarily through Paramount+, had achieved profitability.

During the third quarter of 2023, Paramount+ experienced a 26% increase in global average revenue per user, which was attributed to a price increase. The company has scheduled additional price increases for Paramount+ to take effect this month, and expects to see a financial impact during the fourth quarter.

In June, both Comcast's Peacock and Warner Bros. Discovery raised the monthly cost of their ad-free streaming services. Peacock's annual subscription price was $19.99, but the company also raised the monthly cost of its ad-supported tier by $2. Meanwhile, Warner Bros. Discovery increased the monthly cost of Max without ads by $1.

"Gunnar Wiedenfels, the finance chief of Warner Bros. Discovery, stated during an industry conference last year that for a decade, an enormous amount of high-quality content has been given away at a price far below its fair market value. He believes that this is being corrected and that price increases are happening across the entire competitive set."

According to Forrester's Proulx, the revenue increase in Disney's most recent quarter was mainly due to higher subscription prices, as user growth and ad revenue alone cannot sustain profitability.

He stated that consumers should share some of the responsibility for revenue growth, and users are experiencing the pressure.

According to Hub Entertainment Research, 90% of 3,000 surveyed consumers agreed that streaming video subscriptions are raising their prices more frequently than in the past.

Ad support

In an effort to attract more advertisers, companies are encouraging consumers to opt for ad-supported streaming tiers, which are typically less expensive than commercial-free options, according to Proulx.

And many of those consumers are taking the option.

Max's ad-lite tier, which accounted for over 40% of global gross adds last quarter, is expected to drive meaningful growth ahead, according to Warner Bros. Discovery's Wiedenfels during last week's earnings call.

Streaming ad revenue has doubled year over year, as noted by media companies, including Warner Bros. Discovery, which announced this during its second-quarter earnings conference call.

In the second quarter, Paramount's advertising revenue increased by 16%, thanks to the success of Paramount+ and Pluto TV, the company reported.

According to Antenna's research from February of last year, 75% of Peacock subscribers were on the ad-supported tier, which was the largest share among major streamers at the time, with Hulu at 57% and Paramount+ at 43%. The streaming companies usually do not reveal the subscription breakdown by tier.

According to Tim Nollen, senior media tech analyst at Macquarie, the advertising tier for these companies is attractive because they can generate as much revenue from ads as they do from the subscription fee on the ad tier.

Netflix initially resisted advertising, but eventually changed course in 2022 due to a decline in subscriber growth. The company also recently eliminated its lowest-cost, ad-free plan, leaving consumers with two options: a $6.99 ad-supported plan or two ad-free plans priced at $15.49 and $22.99.

Netflix aims to increase value and engagement before raising prices for both tiers, as stated by co-CEO Ted Sarandos in the company's second-quarter earnings call. The low entry price of the ad tier makes Netflix more accessible to users, according to Sarandos.

Research by Forrester shows that price-conscious streaming consumers are willing to put up with ads in order to pay lower subscription fees. However, ad tiers are not immune to price hikes, as Disney+ has recently increased the cost of its ad-supported plan.

Disney launched its ad tier in December 2022, allowing existing subscribers to choose between paying an additional $3 per month or accepting ads. Nearly 95% of Disney+ premium plan subscribers opted to pay for ad-free streaming, according to Antenna.

In a conference call, Warner Bros. Discovery announced that it experienced fewer customer losses than anticipated in July after raising the price of its ad-free streaming service to $1.

Proulx stated that Disney, along with others, will keep raising prices until there is a significant departure of users.

Keeping subscribers

Jon Giegengack, founder of Hub Entertainment Research, stated that one significant advantage for streamers is that users are generally unwilling to compromise on their preferred content, even when prices rise.

According to Proulx, the total cost of streaming can sometimes be higher than cable for certain consumers because the content they consume is spread across different platforms.

Disney, Paramount, and Warner Bros. Discovery have started offering bundled services at a discounted price. This allows consumers to save money while accessing TV content across different platforms, as streaming may no longer be cheaper than traditional television, according to Proulx.

According to Nollen, bundles are a way for providers to increase revenue because they anticipate that fewer people will cancel their bundled subscriptions compared to stand-alone ones.

"Nollen stated that the new streaming industry is not as profitable as the old pay TV industry, and everyone is aware of this, leading to efforts to improve its financial situation, such as bundling."

Disney and Warner Bros. Discovery are following suit by cracking down on password sharing among streamers.

Giegengack highlights the growing competition among streaming services as consumers face increasing subscription costs. Although low subscription fees initially helped other streamers attract subscribers, he emphasizes that they can no longer sustain this strategy.

Giegengack stated that the current pricing model, which offers a substantial amount of content for a reasonable price, is an incredible deal but may not be sustainable in the long run.

Comcast, the owner of NBCUniversal, is also a co-owner of Hulu and holds U.S. broadcast rights to all Summer and Winter Games through 2032.