The Walt Disney Company is finally taking the next step toward making its streaming platforms more profitable — even if it’ll upset consumers.
Bob Iger, Disney’s chief executive officer, confirmed on Thursday that Disney will start to crack down on password sharing, a common practice where multiple people share a single paid account. The entertainment giant in late 2023 had said it would begin limiting password sharing on Disney+ and Hulu in Canada, the U.S., and the U.K.
Letters sent out to subscribers in February notified them of changes to their services terms and conditions agreements, which went into effect on March 14. Enforcement will begin in June, Iger told CNBC Thursday.
“In June we’ll be launching our first real foray into password sharing,” Iger said, adding that it will take place in “just a few countries in a few markets, but then it will grow significantly with a full rollout in September.”
Profitability has been a major issue for streaming companies. Just Netflix, Hulu, and Warner Bros. Discovery have managed to turn a profit since the first streaming platform — Netflix — launched 17 years ago.
Companies have focused on increasing rates and offering ad-supported plans to their services to recoup some losses, although that has likely cost them some subscribers. The weighted average churn rate for U.S. streamers has almost tripled to 5.5% over the past four years, according to a report from the streaming analytics firm Antenna.
Iger told CNBC that Disney’s streaming businesses needs to increase user engagement, reduce marketing costs and “program more smartly” outside of the U.S., among other things. Iger last year appointed Alan Bergman and Dana Walden to lead the company’s new entertainment unit that oversees streaming, TV, and film content creation.
Currently, Disney operates three streaming platforms in the U.S. — Disney+, Hulu, and ESPN+. Disney owns Hotstar in India and Star+ in Latin America, although Star+ will be merged with Disney+ in June.
Last November, the company said it would purchase Comcast’s stake in Hulu for at least $8.6 billion and began offering Hulu’s content on Disney+ last week, which Iger said is doing “extremely well.”
The Disney CEO has previously said the company could turn a profit with streaming by the fourth quarter of 2024, although Barclay’s has predicted a faster turnaround.
“We aim as I said for this business to be a growth business for the company with margins that our shareholders will feel good about,” Iger told CNBC. “I’m confident that we’re on the right path but we still have a lot to [do].”
Disney follows Netflix into password policing
Netflix — the “gold star” of streaming — has been cracking down on password sharing since last May, a move that has already led to huge growth in its subscriber base. The company added nearly 22 million subscribers in the second half of 2023. Warner Bros. Discovery’s Max, formerly known as HBO Max, will also begin cracking down on password sharing in 2024.
Iger’s comments came just a day after Disney’s board handily defeated a hostile takeover attempt from activist investor Nelson Peltz, who made Disney’s position in the streaming industry a central part of his criticism. Peltz had called for Disney to hit“Netflix-like” streaming margins of 15% to 20%.
While speaking at the Morgan Stanley Technology, Media and Telecom Conference on March 5, Iger said Disney+ wasn’t able to outperform Netflix due to his platform’s less advanced technology.
“One of the reasons why their margins are so much more significant than ours is because they have that technology,” Iger explained last month. “So, our marketing expenses are significantly higher, our churn rates are higher than they need to be.”