Disney CEO Bob Chapek, coming off a promotional blitz at the company’s D23 conference last weekend, reiterated many of those messages for a Wall Street audience but struck a more definitive tone than ever before in outlining the future of Hulu.
Speaking at the Goldman Sachs Communacopia & Tech Conference, Chapek noted that while Hulu has been operated by Disney since 2019, combining it with Disney+ will need to wait due to Comcast’s financial interests in the service. Under the terms of a deal reached by the companies when Disney acquired most of 21st Century Fox, Disney can buy out Comcast at the start of 2024. Chapek said he “would love to” execute the buyout sooner, but he indicated Comcast is not in a hurry. Recent estimates have pegged the value of the stake at $27.5 billion and that number is not likely to decline during an era when streaming assets continue to be prized.
“The thing that you worry about when you’re Disney is brand friction, with some of the content that we may have in general entertainment,” Chapek said. “I am amazed every day in this job how elastic the Disney brand is. I would tell you that we have had no blowback whatsoever in terms of including that general entertainment content on a Disney-branded streaming proposition” in territories outside of the U.S. “I’m not saying it would be received exactly like that in the U.S., but it gives us some reason to believe that we have more degrees of freedom than anybody would have ever suspected.”
As of the most recent quarterly report, Disney said Disney+ was up to 152.1 million subscribers, and Hulu had 46.2 million. Disney+ is global, while Hulu remains only in the U.S. In previous public appearances and press interviews, including some last weekend at D23 (and this interview with Deadline), Chapek took a more circumspect tone as to the blending of Hulu and Disney+. But bringing them together has long been expected by many insiders and industry observers, and it would match the strategies afoot at Warner Bros Discovery, Paramount Global and other companies as the streaming market matures. Significant cost savings would also be unlocked by the move.
At the same time, the task of putting programming like dystopian drama A Handmaid’s Tale, topical comedy films like Plan B and Happiest Season or edgy F/X titles like American Horror Story alongside Pixar movies or other PG-rated fare has always posed a unique challenge. Still, Chapek said he has become convinced by consumer feedback and company data that such an offering could be rolled out and “not be subject to organ rejection by the consumer.”
Continuing to gain scale in streaming remains a key strategic objective for Disney. While in the aggregate it now has more total subscriptions than Netflix, many customers subscribe to more than one of its services, while Netflix’s base of 220-plus million is unduplicated. Along with helping it grow, Chapek said a combination could minimize what he called “consumer friction” resulting from trying to toggle between two different streaming apps. “Long-term, we can avoid that, and 2024 is not that far away,” he said.
Even in the U.S., Disney has been realigning its programming with an eye toward stocking Disney+ with more titles not directly connected to its original five pillars of Marvel, Pixar, Lucasfilm, National Geographic and Disney. It shifted ABC mainstays like Dancing with the Stars and Black-ish to streaming, after seeing significant tune-in and new subscriptions for Peter Jackson’s Beatles docuseries Get Back last fall.
Pricing was another major topic during the 40-minute session. Asked about what kind of price increases may be possible down the line — even though the company is getting set to implement its second major hike later this year — Chapek said he wasn’t expecting a spike in churn. Therefore, he suggested, more increases could be on the way soon. “It’s what the market will bear, which is a direct reflection of price/value, and I think we’re way under-priced relative to the value that we provide,” he said. “We owe it to our shareholders to try to get that recognized.”
Data from the nearly 3-year run of Disney+ and the path of ESPN+, which launched in May 2018, will help inform decisions on pricing, Chapek said.
Disney next month will increase to $10.99 for the ad-free plan, ahead of the rollout of an ad-supported tier. Subscribers who want to continue paying $7.99 for Disney+ will be able to as long as they don’t mind watching ads. Hulu’s ad-free tier, meanwhile, is jumping to $14.99 a month from $12.99, and its ad-supported version will go to $7.99 from $6.99. ESPN+ said in July its unbundled version was leaping almost 40%, from $6.99 to $9.99.
While a bit of sticker shock is unavoidable, Chapek said the price where Disney+ began — $6.99 in November 2019 — is “absurd” in retrospect and makes comparisons seem drastic. In April 2019, when Disney announced the original price of Disney+, prompting audible gasps among the Wall Street and media crowd in attendance, the level of investment in programming was not what it became, Chapek maintained. Still, coming in near the low end of the streaming market “helped us get to where we’re at, with those huge sub numbers,” he acknowledged. “It’s hard to believe we’ve only been at this three years.”
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