The race for premium video streaming leadership is basically boiling down to Walt Disneyin (NYSE: DIS) Disney + e Netflix (NASDAQ: NFLX). The latter will always be in the conversation. Netflix starts 2020 with 203.7 million subscriptions paid for by streaming worldwide and, by the end of next month, expects to be close to 210 million.
Disney + has less than half of Netflix’s premium subscription count, but is growing considerably faster. It exploded to 94.9 million premium subscribers in early January, an incredible feat for a platform that wasn’t even about 14 months before.
Disney, of course, has much more to offer than Disney + – and we’ll get there soon – but it’s as good a place as any to start deciding which market belongs to your portfolio. Is Disney the best buy? Is Netflix the best addition? Let’s take a deeper dive to see which should be at the top of your shopping list.
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Nothing but Netflix
Disney + is naturally growing much faster than Netflix, but let’s not assume the boss is a slow one. Netflix had 158.3 million premium accounts on its rolls at the end of the third quarter of 2019, weeks before the launch of Disney +. The 45.4 million net additions it has scored since then are less than half of Disney’s market share, but there is more to Netflix than just a gross number of viewers.
There is price elasticity for the Netflix model. It is raising the price of its most popular plan this year, something it has done five times since the beginning of 2014. Average revenue per membership has increased from $ 9.88 to $ 11.02 a month, despite entering markets cheaper international currencies and face headwinds of the exchange rate.
Disney + costs considerably less than Netflix, and its average subscription revenue has been declining since its launch, as it transports its platform abroad at more affordable rates in developing international markets. Disney’s average monthly revenue per user dropped from $ 5.56 to $ 4.03 last year. Introduced in a new way, we’re talking about Netflix at a revenue execution rate that translates to $ 2.2 billion a month – almost six times higher than Disney + by $ 382 million.
There is an advantage to the Netflix scale. If you’re trying to sell a new movie or show, you want Netflix to reach the widest possible audience. No company can spend as much as Netflix without breaking the bank, as it can divide its programming costs by the largest paying audience.
Does Netflix have to win this fight? Right? Well, leave Mickey Mouse.
The mouse always wins
If this were simply a Disney + battle against Netflix, then, of course, the nod would go to Netflix. Disney’s market value of $ 347 billion is $ 100 billion higher than that of Netflix. However, Disney’s eponymous direct-to-consumer streaming service is only a small part of the empire here. Disney + may be the business that generates all the excitement and headlines, but currently accounts for only 7% of the revenue from the media stock.
At the moment, Disney + isn’t even the entertainment giant’s biggest profiter among streaming services. Disney-owned Hulu is actually generating more than twice the revenue from Disney +. Investors are also receiving the most visited theme parks in the world, ABC, and a majority stake in ESPN.
In a world where content is king, Disney owns Pixar, Marvel and Lucasfilm. This is an intellectual property portfolio that was able to produce the six highest grossing films of 2019 – you know, when we went to the cinema.
Netflix is great, and even when Disney is running on all cylinders, Netflix will still be the fastest growing company. I own shares in both companies, so obviously I believe that both shares can beat the market. However, with Disney having so much to offer besides its rapidly growing Disney + platform, it’s the best buy here.