In Disney’s Q3 FY Earnings, the company announced a bundle offer for their three streaming services: Disney+, Hulu, and ESPN+. The three-pack bundle will be offered at $12.99 per month while Disney+, Hulu, and ESPN+ are all separately offered at $6.99, $5.99, and $4.99 respectively. If a customer were to pay for all three services separately it would cost $17.97 per month, making the bundle a ~$5 savings per subscription. The Disney bundle will only include ad-supported Hulu; as it stands Hulu with no ads will continue to be priced at $11.99.
The overall staggered pricing strategy for each of the three Disney-owned services reflects what value Disney is placing on each service. As Disney+ is their flagship offering it exists as the most expensive standalone of the three, and therefore conveys the greatest value to customers. This is in line with Disney’s overall strategy and Bob Iger’s statements that Disney+ the biggest corporate priority he’s seen in his recent tenure.
The $12.99 bundle price point is incredibly competitive in the US marketplace and rivals Netflix’s standard $12.99 package head on. Many speculate that Disney+ will deeply challenge Netflix’s US market-share and this matching price point signal’s that Disney is ready to take on that challenge. The value in the Disney three-pack bundle will offer three streaming services compared to Netflix’s one main offering. While three streaming services seems better than one at first glance, Netflix still greatly overshadows the Disney bundle in terms of content quantity.
Netflix and Disney programming will both respectively cover kids content and film and TV content for all ages. Netflix holds competitive advantage with documentaries, comedy specials, and a strong originals TV slate while Disney has strengths with blockbuster movies, sports coverage, and brand IP. Netflix will continue to promote their service as completely ad-free while the Disney bundle will have a mix of ad-supported content. It is unlikely that Disney will offer a secondary bundle completely ad-free in the short term. Creating two bundles out of the gate might confuse messaging and is not in line with Hulu deals that have run in the past. If they were to use the same pricing structure in the future, the ad-free bundle would likely be priced at $18.99 and offer a $5 discount from the three services combined. Because the majority of Hulu viewers watch the ad-supported offering, Disney is leaning into their largest subscriber base with this bundle.
Marketing for Disney+ is set to take effect later in August. The brand and bundle will have significant cross promotion opportunities across all three services, Disney parks and resorts, and their consumer products. The upsell opportunities are great for this bundle. We have seen significant success with the $12 Spotify/Hulu bundle, and that trend should continue with the Disney three-pack bundle.