Analysts seem to be betting on Disney + to match, if not best, Netflix as the world’s streaming leader over 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 over the battle. The main event seems to be the relatively young company, with a long history of streaming dominance, compared to the time-tested giant, which is still in the early stages of its streaming life.
Netflix vs. Disney, who will fall? None. 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. Not only was it the big fish in the small pond when it switched to streaming, it actually created the pond. Over the years, the company has been responsible for a number of the most popular television and film events and has changed popular culture forever. These include hit series such as: Stranger Things, YOU, Orange is the New Black, When They See Us, The Umbrella Academy. Along with hit movies like “The Irishman and Spencer 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 upcoming Paramount + (which will take over CBS All Access). The long-term success of these services is still very much in the air. Expect numbers to continue to grow, another group is likely to merge into others, and the rest will join Quibi-like, extinct and quickly forgotten.
And then there’s Disney +, the imagination of former Disney CEO and current CEO Bob Iger. The Disney directorate direct to users includes Disney +, Hulu, ESPN + internally and Disney +, HotStar and Star internationally.
Disney’s media empire is huge and includes Walt Disney Pictures (Mary Poppins, who put Roger Roger, honey, I folded the kids, along with a live remake of The Lion King, Aladdin, Beauty and the Beast, Mulan, and more). Walt Disney Animation (Frozen, Moana, Entangled, and more), PixarToy Story, Inside Out, Amazing, Soul, and more), LucasfilmStar Wars, Willow, Indiana Jones), Miracle (The Avengers, The Iron Man, The Black Panther, and more), 20th-century studios, the former 20th-century Fox, which includes The Simpsons, Bob’s burgers, Deadpool, Alien franchise, X-manand billions of dollars in other content), National Geographic, Searchlight Pictures, and ABC, ESPN, FX, Disney Channel, and Freeform, to name a few.
Investors have studied consumer behavior around streaming, and the consensus is that most consumers would be willing to pay about $ 30 a month for streaming. This would mean two to three services per customer. While AppleTV +, Amazon Prime Video, Peacock and Paramount + are fighting for third place, it looks like the streaming leaders will be Netflix and Disney +.
Hulu was abandoned purposefully as it served as a sister service to Disney +.
The main strengths of both services are …
– Netflix essentially created the world of streaming and was the undisputed leader in creating new content during its thirteen years of growth.
Disney has had content for nearly centuries and has acquired some of the most popular brands in entertainment.
Although these are the initial strengths of any company, both services grow beyond these common features. As Netflix continues to grow, what was once thought of as new content is beginning to be added to create a recognizable and powerful library. Netflix also supports its library of licensing transactions, although some of its largest downloads have shifted to other services. An example of this is the extremely successful series The officewho recently moved from Netflix to Peacock.
Disney is not just relying on its deep library of family favorites, it has launched a massive production machine ready to broadcast the long-awaited new content for the service. The Mandalorian is a huge win for Disney and the next two years are full of new series, movies and promotions.
This investment in new Disney content is what attracts the attention of investors, along with the breakthrough subscriber growth that Disney + has seen in its short life.
Disney plans to invest between $ 14 billion and $ 16 billion a year in new content on Disney +, Hulu and ESPN + by 2024. This is roughly equivalent to Netflix’s content spending for 2019, which was about $ 13.9 billion. Dollars.
Disney will soon be responsible for creating Netflix content while sitting in the industry’s most valuable library. Disney will be able to grow from the vast array of properties it owns, along with creating new content and using the power of its media networks, theme parks and retail divisions to promote these projects.
In early December 2020, Disney announced that it had amassed more than 86 million Disney + subscribers, fulfilling its five-year forecast in just one year. Hulu reached 38.8 million subscribers and ESPN + 11.5 million. The total number of Disney streaming subscribers exceeds 137 million.
Netflix added 37 million subscribers in 2020 and ended its fiscal year with a total of about 200 million subscribers worldwide. The benefit of nearly a decade and a half of streaming is the ability to accumulate a huge number of subscribers, the disadvantage is that growth slows down as the pockets of available customers shrink.
Disney is growing faster than Netflix, but this can be attributed to Disney + as a new service, which means there is a lot of room for growth. At the same time, Netflix has a larger number of subscriptions, but this may be due to the fact that it adds customers for thirteen years – ten times longer than Disney +.
So the question remains, which future is brighter?
At the moment, the investment community seems to see Disney as the better bet. Analysts see a bright future for both streaming services, but Disney’s huge library for many generations, their recent corporate restructuring focused on streaming, their huge investment in new content and the wide range of popular properties combined with their initial success in attracting subscribers give Disney the advantage.
A Wall Street analyst predicts that Disney will overshadow Netflix in the number of subscribers by 2023, and a number of analysts have moved Disney shares from a hold to buy. The shares ended on Friday, January 22, at 172.78 dollars per share. The Citigroup analyst set the target price for Disney shares at $ 205, which is approximately 16% above the place where the shares were settled in the last week. Wall Street analyst UBS has raised the target price for Disney shares to $ 200, saying it believes Disney will reach a scale similar to Netflix by 2024.
Disney’s stock price rose rapidly as the pandemic decline in March 2020. Even as Covid-19 mowed down Disney’s parks, experience and products, one of the company’s most profitable and well-known divisions, the stock price reached all the highest peaks in the past month. This is mainly due to the strength of their streaming service and the expected rapid recovery of their theme parks and cruise lines once Covid-19 numbers start to fall.
Another advantage that Disney has over Netflix is that they have some of the most popular intellectual properties, creating value for money and allowing Disney to spend less on a content subscriber. This will stimulate the economy tremendously. Think about it, hypothetically Disney could create a series around a popular character like Woody from Toy Story without having to pay license fees for the property. Plus, you don’t have to spend a lot to advertise the series, as the protagonist is already known around the world.
This advantage quickly adds overtime and portends the future of Disney. While Netflix will have to pay royalties to create a new series with a popular character, or create a brand new character and spend time and large sums of money to introduce the public, with no guarantee that the project will be well received.
This points to the brilliance of Bob Iger and his foresight to buy Pixar, LucasFilm, Marvel and 21st Century Fox during his tenure as CEO. The power of these properties far exceeds the increase in content to the library. They provide endless opportunities to create new content with an already established fan base, saving the company a huge amount of money.
The hippopotamus, which is Walt Disney Company, also allows a low monthly fee for Disney +. With the exception of any packages or promotions, Disney + ‘s standard plan currently costs $ 6.99 per month in the United States and will increase to $ 7.99 in March 2021. Netflix’ s standard plan costs $ 13.99 per month. Because Disney has many revenue opportunities (theme parks, box office, merchandise, licensing agreements, live theater, and a huge real estate portfolio), they can offer their services at a low price. Apart from streaming, Netflix has no other great revenue opportunities. This has always been a problem for Netflix compared to Disney, as well as AppleTV + and Amazon Prime Video, both of which are some of the most successful companies in the world, even without their streaming service.
Disney also impressed investors with its growth abroad. Disney + has merged with Hotstar in Indonesia (the fourth most populous country in the world). Hotstar was owned by 20th Century Fox and was acquired by Disney when they 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 offered both services as one. The move has already attracted Disney + 2.5 million subscribers in Indonesia, compared to just 850,000 Netflix subscribers.
This is a pretty big example of Disney + ‘s strategic international expansion. The expansion strategy is very localized, Disney does not deal with a universal model suitable 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, and it all looks different from Disney + available in the United States.
The main content of Disney is the same, but local additions and efforts to comply with cultural norms make each region unique.
With so many streaming services being introduced recently, there are many examples of companies that have done it right and others that have stumbled. Disney seems to have done it right so far.
There are no guarantees in the entertainment business, and analysts’ forecasts are just forecasts. It seems that Netflix, the original streaming leader, may finally have legitimate competition. If many experts are to be believed, Disney could become the new leader in the industry sooner than anyone expected, even just a year ago.
Regardless of who gets the most subscribers, which share price jumps the highest, or who can claim the highest return on investment, the future for both 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 race to the top should stimulate new high-quality content.
As Disney and Netflix fight for bragging rights, the real question remains which of the other streaming services will go the way of Quibi and which will fill the vacuum for third place? No one knows, but the battle will certainly be worth the price of admission.