The Magical Kingdom is undergoing a transformation. During an earnings call on Wednesday, CEO of Disney, Bob Iger, informed stakeholders that the company will commence a new initiative to curb password-sharing beginning in September in a determined manner. Iger did not reveal the specific methods the company will employ to restrict password-sharing, but it is anticipated that this will involve monitoring logins originating from locations other than the subscriber’s residence and prompting those suspected of account sharing to pay a fee. This announcement precedes the company’s plans to raise monthly subscription prices for Disney+, Hulu, ESPN+, and their associated packages in October.
For the average individual, this signifies an increase in expenses and the need to make tough choices. With an influx of streaming services entering the market and many of them escalating prices or introducing ad-supported options, viewers are left grappling with the decision of selecting two or three services they are willing to pay $10 to $20 per month for. Given Disney’s extensive content library (Marvel, Pixar, Star Wars) and Hulu’s original series like The Bear and a plethora of sports on ESPN+, it is probable that many subscribers will continue to subscribe to the service and may even be willing to pay extra to share their logins.
Sarah Henschel, a principal analyst at Omdia focused on the streaming industry, remarks, “The clampdown on password-sharing has proven advantageous for other streaming platforms. It is a tactic that effectively boosts revenue. Nonetheless, it also leads to considerable consumer dissatisfaction with streaming services.” In simpler terms, subscribers are inclined to stay on and potentially pay additional charges to share their accounts, but this may result in them forgoing certain services.
The strategy worked well for Netflix. Towards the end of last year, following some turbulent quarters and amid the launch of ad-supported tiers and a paid sharing program by the streaming behemoth, Netflix gained 9 million new subscribers globally. Since then, the company has not experienced any significant drop in the number of subscribers. To date, it remains the primary case study—HBO Max appears poised to implement a similar crackdown later this year or early next, while other platforms have yet to experiment with this approach—but it demonstrates that paying to share a streaming account does not necessarily drive users away. Or at least, not yet.
Wade Payson-Denney, an analyst at Parrot Analytics, comments, “The implementation of a password crackdown by Netflix—alongside its ad-supported tier—has tremendously boosted subscriber growth.” Before Netflix began cracking down, its global subscriber base grew by 11.8 million in the preceding year; following the crackdown, the base grew by 39.3 million in the subsequent four quarters, according to Parrot. A similar growth trajectory could be on the horizon for Disney.
Change is Inevitable
This is not the first occasion Disney has raised concerns about such a crackdown. Last year, Iger hinted at the company exploring ways to limit this practice; in February, the company announced intentions to initiate a paid sharing program, which was subsequently piloted in only a handful of markets in June.
Since the launch of Disney+ in 2019, Disney has been striving to expand its subscriber base and turn a profit from its streaming service. In the last quarter, Disney+ only gained approximately 200,000 new subscribers, bringing the total to 153.8 million—a modest figure compared to Netflix’s claimed 270 million subscribers, but still commendable and a substantial improvement from the previous year. Meanwhile, HBO Max is endeavoring to surpass 100 million subscribers as it continues its growth trajectory.
Among the announcements made during Wednesday’s earnings call, Disney disclosed that its combined streaming platforms generated profits for the first time in the last quarter, yielding an operating profit of $47 million. This marks a significant upswing; in the third quarter of the preceding year, Disney’s streaming division incurred losses of $512 million. The recent profits were primarily attributed to ESPN+.
