How Will Disney Price Its New Streaming Services? (NYSE: DIS) | 24/7 Wall St.

The key word here is “distribution.” By taking control of the distribution of its own content, Disney could charge consumers what it charges pay-TV operators and still make money. It could charge consumers a higher price that is still below what a pay-TV service could charge and make even more money. But that might cause the cable and satellite companies to drop their current deals for Disney and ESPN content.

Without speaking directly to the price of either the ESPN or Disney service, Iger said:

What we’re going to go for here is significant distribution because we believe one way to be successful in the long run is for both of these services to reach a maximum number of people.

That shouldn’t suggest a huge discount on what we might be able to charge, but it should suggest at least initially a very reasonable approach to our pricing. We don’t necessarily enter this with a notion that we’re going to cannibalize our existing businesses significantly, but we have had a discussion about whether our pricing strategy can have an impact one way or the other on that.

Hulu, in which Disney is a partner, launched its live-TV service, Hulu With Live TV, in May at a monthly subscription fee of $39.99. But this service includes around 50 channels and is a direct competitor to some cable packages.

HBO Now, a standalone streaming service that does not require a cable subscription, costs $15 a month.

Our guess is that Disney will price its ESPN service, which it says will stream 10,000 live events a year, at less than $15 a month. The company doesn’t reveal how much ESPN costs pay-TV providers, but there seems to be a consensus that about $7 to $8 of a monthly cable bill goes to pay for ESPN. But as cable and satellite subscriber numbers decline, neither the pay-TV firms nor Disney can make up that lost revenue without raising prices. That suggests that the price for the new ESPN streaming would likely have to be higher.

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How Will Disney Price Its New Streaming Services? (NYSE: DIS) – 24/7 Wall St..