Disney's password sharing crackdown shows how the company is still chasing Netflix
It seems like Disney is trying hard to be like Netflix (NFLX).
Disney (DIS) revealed during its fiscal third quarter earnings call that it will address password sharing — echoing the strategy of Netflix, which recently rolled out its password-sharing crackdown to US subscribers in May after first announcing the initiative in October 2022.
"We are actively exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and family," CEO Bob Iger said on a call with analysts on Wednesday.
The executive, who said the number of subscribers sharing accounts is "significant," explained the company will update subscriber agreements with additional terms on its sharing policies, which will roll out "sometime in 2024."
It's a classic tale of follow-the-leader as Netflix remains the only consistently profitable streaming service — outside of Warner Bros. Discovery (WBD), whichturned a streaming profit in one quarterearlier this year.
Third Bridge analyst Jamie Lumley told Yahoo Finance all of the major streamers had been weighing password crackdowns for well over a year — but wanted to wait and see what Netflix would do first.
So far, so good with Netflix crushing subscriber expectations in its fiscal secondquarter results, notching 5.89 million net additions versus the estimated 2.1 million. The platform lost nearly 1 million subscribers in the prior-year period.
"Looking specifically at the US market, Netflix was able to drive over a million new subscriptions [in the second quarter], which had been roughly flat for a number of quarters at this point," Lumley said. "Right now, a lot of these studios and streamers are seeing that this initiative can work and it can drive growth in what has been a saturated and stagnant market domestically."
Therefore, in the face of Netflix's success, Disney's timing makes sense — especially as the media giant seeks to reach its target of achieving streaming profitability by the end of fiscal 2024.
Direct-to-consumer losses at Disney totaled $512 million in the quarter, a significant improvement over the year-ago period, but still an indication of a long road ahead.
Lumley said it's unlikely Disney hits streaming profitability by 2024, surmising 2025 is more probable.
Coupled with the password sharing announcement, Disney also announced price increases for the second time this year — another tactic Netflix has employed in recent years.
Effective Oct. 12, the price of the Disney+ ad-free plan will rise by 27% to $13.99 a month in the US, up from $10.99. That's double the $6.99 monthly cost Disney charged for the service when it first launched in 2019 and less than two dollars shy of Netflix's ad-free Standard tier, which costs $15.49 in the US.
Disney shares are up just 6% year to date compared to Netflix's 45% jump.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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