Low Price for Disney+ Puts the Squeeze on Apple TV+Tuesday, April 16, 2019, 2:32 PM ET|Posted by Will Richmond
The biggest piece of news from last week’s Disney+ mega event was certainly the reveal of the service’s rate: just $7/month, or $70/year, and its implications for competitors, most notably Apple TV+.
Back in September, 2017, just after Disney CEO Bob Iger announced Disney was shifting its strategy toward a direct to consumer (DTC) model, and gave a preview of the massive trove of Disney/other content that would be included, I wrote that success for the service would be highly dependent on its price.
Would Disney+ be priced on the lower end of market expectations (I speculated about $10/month) to achieve strong adoption like Netflix has? Or would it be priced on the higher end (say $20-$25/month) in a market “skimming” approach like what HBO Now has followed? Given the money Disney would be foregoing in third-party distribution fees by going DTC, there was huge conflicting pressures on the pricing decision.
Now that we know Disney chose not just to go with a low price, but a VERY low price, one of the implications to consider is how this affects Apple’s decision to price its own pending SVOD service, Apple TV+ which is coming later this year. There’s no doubt Apple will be seeking to bundle Apple TV+ with other services - music, gaming, news or some combination. But Apple TV+ still needs its own standalone price.
At its own event last month, Apple brought out a range of A-list talent as content creators. But it was silent on the monthly price, which I thought was a clever option retaining move to wait and see how Disney+ would be priced.
The critical issue for Apple is that Disney+ includes a vast library of beloved movies, TV shows and characters. Apple TV+ is starting from scratch - no library, no proven hits, no momentum behind new shows, and the reality of more high-quality TV shows being available across multiple services than ever. Disney+ also drafts off the gold standard Disney brand, which means a ton in kids’ content (not to mention the individual franchises, plus the Pixar, NatGeo and other brands). Apple makes fantastic devices and has a gazillion consumer touchpoints, but doesn’t have a brand in content.
So all of this means Disney+’s low price has put a major squeeze on what Apple is going to be able to charge for Apple TV+ as a standalone service, at least at launch. Apple TV+ is inevitably going to be compared to Disney+. And with the latter $7/month with all the content it offers, what’s a fair price that will achieve reasonable adoption for Apple TV+? $2/month? $4/month? Less? More?
Disney’s pricing decision has now created a pricing conundrum for Apple. As if it weren’t already making a huge blind leap into the content unknown, Apple now needs to face the reality that the leap’s profitability is going to be very challenging given the pricing ceiling Disney+ has created.