Analysts seem to be betting on Disney + to match, if not better, Netflix as the world leader in streaming for the next three to four years.
With the seemingly endless flow of new streaming services, the playing field can be confusing. However, a real battle seems to be taking shape above the fray. The main event appears to be the relatively young company, with a long history of mastery of streaming, against the time-tested giant, which is still in the early stages of its streaming life.
Netflix against Disney, who will fall? Nor. Who will prevail? Both. Who will reign as a streaming champion? The signs point to Disney.
There is no doubt that Netflix has been a leader in the streaming industry for years. It wasn’t just the big fish in the small lake when it transitioned to the stream, it basically created the lake. Over the years, the company has been responsible for a number of the most popular television and cinema events and has forever changed popular culture. This includes successful series like: Stranger Things, YOU, Orange is the New Black, When They See Us, The Umbrella Academy. Along with successful films like The Irishman and Spenser Confidential.
Over the years, Netflix has seen many competitors enter the market with varying degrees of success: AppleTV +, Amazon Prime Video, Peacock, Discovery +, HBOMax and the next Paramount + (which will replace CBS All Access). The long-term success of these services is still in the air. Expect one number to continue to grow, another group will likely end up merging with others and the rest will join people like Quibi, lost and quickly forgotten.
And there is Disney +, the brainchild of former Disney CEO and current CEO Bob Iger. Disney’s direct consumer division includes Disney +, Hulu, ESPN + nationally and Disney +, HotStar and Star internationally.
Disney’s media empire is vast and includes Walt Disney Pictures (Mary Poppins, who framed Roger Rabbit, Honey, shrunk the kids, along with the live-action remakes of The Lion King, Aladdin, Beauty and the Beast, Mulan, and more). Walt Disney Animation (Frozen, Moana, Tangledand more), Pixar (Toy Story, Inside Out, Incredibles, Soul, and more), Lucasfilm (Star Wars, Willow, Indiana Jones), Marvel (Avengers, Iron Man, Black Panther, and more), 20th Century Studios (formerly 20th Century Fox, which includes The Simpsons, Bob’s Burgers, Deadpool, Alien franchise, X-Menand billions of dollars of other content), National Geographic, Searchlight Pictures and the linear networks ABC, ESPN, FX, Disney Channel and Freeform, to name a few.
Investors have studied consumer behavior in relation to streaming and the consensus is that most consumers would be willing to pay about $ 30 a month for streaming. That would mean two to three services per customer. While AppleTV +, Amazon Prime Video, Peacock and Paramount + fight for third place, it looks like the streaming leaders will be Netflix and Disney +.
Hulu is being left out on purpose, as it serves as a sister service to Disney +.
The main strengths of the two services are …
– Netflix essentially created the world of streaming and has been the undisputed leader in creating new content throughout its thirteen years of growth.
– Disney has almost centuries of content and has acquired some of the most popular entertainment brands.
Although these are the initial strengths of each company, both services are growing beyond these general characteristics. As Netflix continues to grow, what was once considered new content is starting to pile up to create a strong and recognizable library. Netflix also strengthens its library with licensing agreements, although some of its biggest attractions have shifted to other services. An example of this is the highly successful series The office, who recently switched from Netflix to Peacock.
Disney isn’t simply relying on its vast library of family favorites, it has started a mass-production machine ready to produce new, highly anticipated content for the service. The Mandalorian it was a big win for Disney and the next two years will be filled with new series, movies and specials.
This investment in new Disney content is what is drawing investors’ attention, along with the growth in subscribers that Disney + saw in its short existence.
Disney plans to invest between $ 14 to $ 16 billion annually in new content on Disney +, Hulu and ESPN + until 2024. This is almost equal to spending on Netflix content in 2019, which was about $ 13, 9 billion.
Soon, Disney will be matching Netflix’s content creation, all while sitting in the industry’s most valuable library. Disney will be able to grow from the wide range of properties it owns, along with creating new content and using the strength of its media networks, theme parks and retail division to promote these projects.
In early December 2020, Disney announced that it had accumulated more than 86 million Disney + subscribers, reaching its five-year forecast in just one year. Hulu reached 38.8 million subscribers and ESPN + reached 11.5 million. Putting the total count of Disney streaming subscribers at more than 137 million.
Netflix added 37 million subscribers in 2020 and ended its fiscal year with a total of approximately 200 million subscribers worldwide. The benefit of almost a decade and a half of streaming is the ability to accumulate a large subscriber count; the downside is that growth slows down as the number of available customers decreases.
Disney is growing faster than Netflix, but that can be attributed to Disney + being a new service, meaning it has a lot of room to grow. At the same time, Netflix has a higher subscription total, but that can be attributed to the fact that it has been adding customers for thirteen years – ten times more than Disney +.
So the question remains: which future is brighter?
At the moment, it seems that the investor community sees Disney as the best bet. Analysts see a bright future for both streaming services, but Disney’s massive, multi-generational library, its recent corporate restructuring focused on streaming, its huge investment in new content and its wide range of popular properties, combined with its initial success in attract subscribers, given Disney the advantage.
A Wall Street analyst predicted that Disney will surpass Netflix in number of subscribers by 2023 and several analysts have shifted Disney shares from waiting to buy status. The stock closed Friday, January 22, at $ 172.78. The Citigroup analyst set the target price for Disney shares at $ 205, about 16% above where the shares were accommodating last week. Wall Street analyst UBS has raised the target price of Disney shares to $ 200, saying he believes Disney will reach a similar scale to Netflix in 2024.
Disney’s stock price has grown rapidly since the pandemic-related fall in March 2020. Even though Covid-19 has hurt Disney Parks, Experiences and Products, one of the company’s most profitable and well-known divisions, the stock price reached all -time highs last month. This is mainly due to the strength of its streaming service and the expected rapid recovery of its theme parks and cruise lines as soon as Covid-19’s numbers start to drop.
Another advantage that Disney has over Netflix is that they have some of the most popular intellectual properties, this creates pricing power and allows Disney to spend less per subscriber on content. This will boost the economy over time. Think about it, hypothetically Disney could create a series around a popular character like Woody’s Toys Story without having to pay any licensing fees for the property. They also don’t need to spend a lot on publicizing the series, as the character is already known worldwide.
This advantage quickly increases overtime and bodes well for Disney’s future. Netflix, on the other hand, would have to pay licensing fees to create a new series with a popular character, or create a brand new character and spend time and large sums of money to familiarize the public, without guaranteeing that the project would be well received.
This shows Bob Iger’s brilliance and his vision of buying Pixar, LucasFilm, Marvel and 21st Century Fox during his tenure as CEO. The strength of these properties goes far beyond the increase in content for the library. They provide endless opportunities to create new content with an already established fan base, saving a huge amount of money for the company.
The giant Walt Disney Company also allows a small monthly fee for Disney +. Leaving aside any packages or specials, the standard Disney + plan currently costs $ 6.99 per month in the United States and will increase to $ 7.99 in March 2021. The standard Netflix plan costs $ 13.99 per month. Since Disney has many revenue streams (theme parks, box office, merchandise, licensing agreements, live theater and a large portfolio of properties), they can offer their services at a low price. In addition to streaming, Netflix has no other major source of revenue. This has always been a problem for Netflix when compared to Disney, as well as for AppleTV + and Amazon Prime Video, both of the most successful companies in the world, even without their streaming service.
Disney also impressed investors with its growth abroad. Disney + joined Hotstar in Indonesia (the fourth most populous country in the world). Hotstar was owned by 20th Century Fox and was acquired by Disney when it bought the parent company years ago. Hotstar is a local favorite in India and is home to a number of popular local series. Disney decided to combine Hotstar with Disney + and offers the two services as one. This change has already earned Disney + 2.5 million subscribers in Indonesia, compared to just 850,000 Netflix subscribers.
This is a very broad example of the international strategic launch of Disney +. The expansion strategy is very localized, Disney is not engaged in a single model for everyone. Disney + available in Canada or the United Kingdom is very different from Disney + available in Latin America, which is different from Disney + available in India, all of which are different from Disney + available in the United States.
The main content of Disney is the same, but local additions and the effort to respect cultural norms make each region unique.
With so many streaming services recently introduced, there are many examples of companies that have acted correctly and others that have failed. It seems that Disney has done everything right so far.
There are no guarantees in the entertainment business and analysts’ forecasts are just that, forecasts. It seems that Netflix, the original streaming leader, may finally have some legitimate competition. Believing many of the experts, Disney may emerge as the new industry leader sooner than anyone expected, even if only a year ago.
Regardless of who gets the most subscribers, what the stock price jumped the highest or who can claim the highest return on investment, the future for Disney and Netflix looks bright. The real winner will be the consumer, as the battle is likely to help control price increases and the creative rush to the top should generate new, high-quality content.
While Disney and Netflix are fighting for the right to brag, the real question remains: which of the other streaming services will follow Quibi’s path and which will fill the vacuum for third place? Nobody knows, but the battle will certainly be worth the price of admission.
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