While Ukraine and Russia are at war, the residents of the United States are feeling it. With radical inflation and high gas prices making products more expensive, people are spending less on leisure goods and entertainment.
Both Disney Plus and Netflix are moving on with their own contradictory plans to continue growth and maintain profits. Also, the industry is oversaturated with competition, and any negative management decision could cause subscribers to shift to a new streaming service.
While most subscribers pay for multiple streaming services—according to Leichtman Research Group—the market is shifting because of the climate of our country and the world. Consumers are starting to look for cheaper services because they have less money to spend. Companies are trying to reach this new market.
Rival services like Discovery Plus, Paramount Plus, and NBC’s Peacock all offer ad-funded plans for around $4.99 a month in the US, and it can be assumed that Disney Plus is trying to reach this market and trying to increase its subscriber count.
Disney Plus plans to have an ad-supported tier to its priceline by 2023. “Disney has yet to confirm exactly how much the new plan will cost. Currently, a subscription to the streaming service will cost you £7.99/$7.99 a month (or £79.90/$79.99 a year) so, unless Disney raises its prices, you can almost certainly expect the ad-supported version to undercut these numbers,” stated by TrustedReviews. Disney Plus spends too much money on original content and isn't profitable but with an ad-based plan, it will be able to increase profits by slowly increasing its ad-based plan price over time without losing a lot of subscribers.
While Disney Plus is moving towards reaching all markets with its ad-based plan, Netflix is trying to maintain profits by relying on its large base of subscribers. According to CNN, “The streaming media company said Friday that it's raising the monthly price for a US subscription to its standard plan by $1.50, to $15.49, and its basic plan by $1 to $9.99. The premium plan increased $2 per month, to $19.99.” CNN stated that Netflix’s growth over the past few quarters hasn’t gone as expected. Investors pressured Netflix into making a decision to maintain profitability, and the only option on the table was raising prices.
Disney Plus definitely has a lead over Netflix. Its large base of subscribers that are loyal to Disney and their studios—Pixar, Marvel, Star Wars—allow Disney Plus to consistently produce original content that appeals to target audiences. Netflix doesn’t have this competitive advantage because it doesn’t have as much material as Disney Plus has, to make original content. Original content is essential for streaming services because it keeps customers interested in their service only, and consistently releasing new and attractive content will keep subscribers subscribed. Both of these companies desperately need more money and more growth because the original content is extremely expensive, especially if the original content is meant to release consistently.