OTT services become more expensive than cable TV

As Netflix and Disney+ raise their subscription prices, the era of cheap over-the-top (OTT) media services seems to be over.

The Financial Times reported on Saturday that the OTT companies in Hollywood, which attracted customers with prices cheaper than cable TV over 10 years ago, now raised their subscription fees to similar levels as cable TV.

According to the newspaper, Disney+, whose subscription fee was less than seven dollars at the time of its launch in 2019, will increase from the current 10.99 dollars for an ad-free subscription to 13.99 dollars in mid-October. Netflix also removed its basic subscription plan at 9.99 dollars, which will practically raise its fee to 15.49 dollars in October.

In order to subscribe to six U.S. OTT services, including Netflix, Disney+, and Paramount+, a customer will have to pay 87 dollars per month as of October this year, which is 19 percent higher than the previous year. Meanwhile, the average monthly fee for the cable TV package with 189 channels is 83 dollars.

According to the Financial Times, such an increase in subscription fees is caused by bigger losses experienced by OTT companies due to a sharp increase in the U.S. interest rate last year. Disney+ revealed that its loss amounted to 512 million dollars in the second quarter of this year. As a result, media entertainment companies, including Disney+ and Warner Bros., dismissed thousands of employees and raised subscription fees.

Another factor contributing to the subscription fee raise is Netflix’s operating profit, which increased by 15.8 percent in the second quarter of this year from last year, despite its decisions to reduce customer benefits by removing a low-cost plan and banning account sharing.


clearlee@donga.com