In an inflationary environment it is important to understand which streaming services will have the leeway to charge consumers more. The central value proposition SVODs offer to their subscribers is a catalog of content that they want to watch for a recurring subscription price. The key point being that it isn’t just catalog size that makes subscribers value a platform but how desirable that content is. That is why Demand is important to understanding what price point a platform should set to be a compelling deal for subscribers and stay competitive with other platforms. We see a clear relationship between the total demand for content on each platform (movies and TV series) and the price point each platform charges consumers.
As streamers continue to raise prices but consumer budgets are squeezed it will be important to strike a balance between keeping up with rising costs while not triggering subscriber churn. With Wall Street’s focus on these platforms shifting from simply looking at net subscriber adds to scrutinizing streaming revenue, the ability to charge consumers more will help these streamers move towards becoming profitable.
As far as stand-alone platforms go, Netflix’s Standard tier looks like a great value for subscribers and offers a more in-demand catalog than we would expect at its $15.99 price point. At the other end of the price spectrum is Discovery+, which is one of the cheapest ad-free tiers at $6.99/month but still manages to punch above its weight with a high demand for its catalog at this price.
On the flip side, the $10.99 price tag for Showtime looks overpriced for the amount of in-demand content the platform is providing to subscribers. Comparing Starz and Showtime, Starz looks to be providing the most value between these two premium cable channels turned streaming platforms. Relative to Showtime, Starz provides its subscribers with a platform of shows and movies with 27% more demand and costing 18% less than Showtime.
Disney+ just launched its new ad-supported tier and Disney+ Premium tier priced at $10.99/month. This looks priced right in line with expectations given the amount of demand for content on its platform. Apple TV+ increased its price in October for the first time since the platform launched (from $4.99 to $6.99). The chart illustrates how the price increase has moved Apple TV+ just to the wrong side “priced right” line. While the price increase now makes it slightly more expensive than would be expected given its catalog demand, it is important to remember that the Apple TV+ catalog is built from exclusive originals which serve as a more powerful incentive for subscribers to sign up. This focus on exclusivity likely allows Apple to charge more than a platform with a similar level of demand that comes in part from non-exclusive content.
Things get interesting when we consider how bundled options are priced. While the Disney+/Hulu/ESPN+ bundle is one of the most expensive options, it makes good on its commitment to subscribers and delivers a highly in-demand catalog of shows and movies. When we consider Hulu or Disney+ on their own, their catalogs are priced in line with what we would expect given the demand for their libraries. The bundled option delivers more demand than we would expect at its price point. This is an example of an effectively priced bundle that should tempt subscribers to upgrade from either platform on its own. Contrast this with the Paramount+/Showtime Bundle. While Paramount+ looks to be attractively priced on its own, the additional cost when Showtime is added to the bundle makes the bundled option look overpriced.
