ESPN+ streaming price jumps 43% to $9.99 a month

Walt Disney Co.’s ESPN will raise the price of its streaming service by 43% next month, betting that it can help cover the escalating cost of sports rights without losing subscribers who are grappling with soaring inflation.

Starting Aug. 23, the cost of an ESPN+ subscription will jump to $9.99 a month from $6.99, or to $99.99 a year from $69.99. ESPN says the price increase reflects the growing amount of live sports and original programming on the streaming service.

Shares of Disney rose on the news, climbing as much as 3.7% in New York.

Disney is taking a risk with the timing of its price hike as the highest U.S. inflation in four decades is already squeezing household budgets, souring people’s view of the economy and forcing some to scale back entertainment and other discretionary spending.

At the same time, media companies are under increasing pressure to turn a profit with their streaming ventures. ESPN+ has been gaining momentum, with subscribers climbing 62% in the past 12 months, to 22.3 million, after years of anemic growth. But it’s still not making money.

On Wall Street, “the buzzword has completely shifted from subscriber growth to profitability,” said Geetha Ranganathan, an analyst at Bloomberg Intelligence. “They’re even willing to risk a little bit of churn if they can boost their ARPU number,” she added, referring to average revenue per user.

The new price structure could encourage more people to buy Disney’s bundle of streaming services. That bundle, which includes ESPN+, Disney+ and Hulu, costs $13.99 a month, or $4 more than the new standalone price of ESPN+. The bundle’s price will not change for now. 

From Disney to the New York Times, media companies are encouraging consumers to buy bundles of their products. Much the way that cable companies have long sold TV, phone and Internet together at a discounted price, the strategy is seen as a way to retain customers who are more likely to cancel if they only get a single product.

“It feels like they’re just pushing people to get the bundle,” Ranganathan said.

ESPN+ includes more than a dozen live sports, including professional hockey, college football, UFC, soccer, lacrosse and golf. This fall, the service will broadcast an exclusive NFL game. It also features original docuseries such as “Man In The Arena: Tom Brady” and the “Places” franchise executive produced by Peyton Manning’s Omaha Productions.

But expenses have been growing. Programming and production costs at the ESPN+ unit jumped 48%, to $454 million, in the quarter that ended in April. And Disney said its direct-to-consumer business, which includes Disney+, Hulu and ESPN+, lost $887 million in the period.

The 43% price hike is so large, and ESPN is such a well-known, iconic brand, that the decision may add to a growing sense among consumers that prices are spiraling out of control.

Yet even after the increase, ESPN+ remains more affordable than many other sports-focused streaming services. NBA League Pass, for example, costs $14.99 a month, while MLB.tv charges $24.99 a month.

—Bloomberg News