Q: What just happened?

Disney and Warner Bros. Discovery (WBD) will launch a combined streaming offer this summer, giving US subscribers access to Disney+, Hulu and Max in one unified bundle. The planned package mirrors a traditional pay TV strategy, in which operators bundle multiple premium channels into one combined offer. This runs counter to the way the largest subscription VoD services have operated to-date, as combinations of medium and large-scale VoD services have typically either centred around re-sell (such as Amazon Channels) or bundles under the same umbrella parent company (such as Disney+/Hulu).

The new bundle will be available through each respective platform, but with Disney reportedly taking control of the billing relationship and paying Warner Bros. Discovery a percentage fee.

Q: What is the attraction to Disney and WBD of bundling its services together?

In an increasingly saturated US streaming market - with launches from Paramount+, Disney+, and Apple TV+ in the last five years alone - the threat of consumer churn is a major consideration. Indeed, some 46% of US respondents to Ampere’s recent consumer survey agreed with the statement “I feel overwhelmed by the numbers of subscription services”, up over 20% from just 18 months ago. Meanwhile the average number of subscription services taken by US SVoD households actually fell from 4.7 in 2022 to 4.4 in Q1 2024.

With both Disney and WBD having largely pivoted to streaming and now having sizeable user bases, two of the major challenges they face are to increase subscriber growth, which has slowed, and to reduce their monthly churn. This is where bundles fit in. Disney and Warner Bros. Discovery will be hoping that pooling their services and content into one bundle, presumably for a discounted price (compared to taking all three services separately) will not only entice new customers to sign up, but also reduce churn.

In terms of acquiring new US subscribers, there is currently limited overlap between the two services, creating a mutually beneficial strategic aspect to the partnership that can increase the addressable audience for each. While overlap between, say, Netflix and Disney+ runs very high, according to Ampere’s survey 49% of Disney+ subscribers don’t currently take a HBO or Max subscription. Meanwhile, the reverse is also true, as 52% of HBO or Max subscribers don’t also take Disney+ - which means that as both services have comparable subscriber bases, the partnership offers each a chance to significant increase their potential audiences.

Q: What’s in it for the consumer?

There is a clear advantage here for subscribers too: more content for a lower price than subscribing to the services separately. In terms of the content that would be available, the catalogues from Max, Hulu and Disney+ complement each other well. Max’s catalogue has an impressive volume of popular Reality and Documentary content, which not only bolsters Hulu’s own collection of these genres, but also complements Disney+’s more Children & Family-focused catalogue.

This bundle also comes at a time where Disney is cutting back on high-budget, premium content, with CEO Bob Iger announcing in its most recent earnings call that it would limit its Marvel output to a maximum of two series and three films a year, for example. A bundle with Max could fill this gap with high-budget shows from HBO such as Last of Us, Game of Thrones and House of the Dragon, potentially allowing Disney’s cutbacks in this area to have less of an impact on consumers.

Q: Why now?

Disney’s decision to launch this bundle with Max comes after the launch of advertising on all US Disney streaming platforms last year. As these ad-supported tiers come with a significant discount for the customer, it gives Disney more flexibility over the price of a potential bundle, with the ability to create ad-free as well as ad-supported bundles to appeal to a range of price points. Additionally, the timing of this bundle launch coincides with Disney’s account-sharing crackdown this summer (something Max has also talked about implementing), so both parties will be hoping to lure account-sharers in particular to take the new bundle, if the price is right.

But bundling in general is already a major theme for the industry in 2024, with this announcement following a similarly strategic proposed partnership within sports, also involving Disney and WBD, as well as Fox.

Q: What could the price of the new bundle be?

While no details on pricing have been outlined yet, there will be both an ad-free and a with-ads bundle. Disney is no stranger to bundling its services together, having launched a Disney+ and Hulu, as well as a Disney+, Hulu and ESPN+ bundle over the last few years. And both parties, of course, have decades of experience of being bundled together in pay TV packages. In this case, assuming a similar discount to the one Disney has applied to its Disney+ and Hulu bundle (37%), the pricing of the new combined bundle could be as follows:

• Basic (Max, Disney+ and Hulu all with ads): $16.50 per month
• Premium (Max, Disney+ and Hulu all ad-free): $30 per month

Q: What does this mean for the rest of the industry?

For other major streaming players, that have either larger household penetrations or more diversified business models - including Netflix, Amazon Prime and Apple TV+ - bundling is less likely to be attractive, given the different strategic role streaming plays within their businesses. Netflix has historically entered into bundling relationships with major pay TV operators, in markets where such a relationship can expand its potential subscriber base, but is less likely to partner with a direct rival.

However, other streaming services (and especially other direct-to-consumer studio streamers) will be watching this development closely over the coming months, assessing whether this is a viable option to grow their subscriber bases and reduce churn rates. This move from Disney and WBD could prompt other significant US players, such as Paramount+ and Peacock, to accelerate their own plans for partnering to ensure they retain and grow their subscriber base.  But bundles in general can make a lot of sense for both operators and the consumers, and one thing seems certain: this won’t be the last big bundling announcement of 2024.