Netflix (NASDAQ: NFLX) Shareholders should breathe easy.
The big revelation has come Disney+ (NYSE: DIS), the new streaming service from the House of Mouse, but it seems Reed Hastings, CEO of Netflix, was right all the time around Disney's potential rival. This is not a deadly threat or even a thorn in the side of the leading streamer.
If you missed it, you'll find the most important information about the new Disney + service here.
- The start is scheduled for the 12th of November.
- The service includes content from Disney Studios, Pixar, Lucasfilm, Marvel Studios and National Geographic. It will also offer 30 seasons The simpsons, and family-friendly movies from Twentieth Century Fox, like The princess brews,
- Disney + costs $ 6.99 per month or $ 69.99 per year. Disney has pointed to a package with Hulu and ESPN +.
With such a price, Disney + Netflix is likely to undercut its most popular package, which now costs $ 13 a month. But, as Hastings said, there is enough room for both services to be successful.
Hastings & # 39; s thoughts on Disney
The Netflix boss has been questioned over and over again about solicitations for his thoughts on the upcoming Disney streaming service and his concerns about other competitors. But he always rejects the questions and plays down the threats.
Here's what he said over a year ago after Disney's bid for Fox went public:
Then they also put together a Disney Direct-to-Consumer service, which we believe will be very successful as Disney has strong brands. And that's how we'll see. We no longer consider it a threat to us when it was Hulu, but it is a great opportunity for them.
Hastings even went on to compliment Disney and said he would subscribe to the new service.
More recently, Hastings said in a profit letter to shareholders:
We earn the screen time for end users, both mobile phones and televisions, over a large number of competitors. We compete with (and lose) Fortnite more than HBO … Our focus is not on Disney +, Amazon (NASDAQ: AMZN) or others, but how we can improve our experience for our members.
The co-founder of Netflix has always been something of the Big Lebowski of Silicon Valley CEOs who have consistently proven to be superkill and undisturbed. But he has a point here, and he's often been right, especially with regard to the development of the streaming industry.
There is a huge variety of entertainment options, and a single competitor will probably only make a difference in margins.
It is also noteworthy that Hastings believes that Disney + will be successful. However, he does not believe that this will affect his business. After the big revelation you can see why.
There are so many differences between the two services that they are not direct competitors. For example, Disney + is family oriented. Netflix wants to offer something for everyone, and its original content is inspired by the edgier motifs that become the bait for Oscar and Emmy awards. Disney has clearly defined verticals for creating content from existing studios, while Netflix provides content from around the world in multiple languages and from a variety of creators, including both scripting and non-scripting programming. This also means that Netflix does not compete directly with Disney + for content, as is the case with HBO, Hulu and Amazon.
Although the quality of the content is more than just the amount, Netflix will have the much larger and more diverse library of the two services – about two-thirds of the 7,500 TV episodes of Disney + will come directly from the Disney Channel. Netflix also plans to spend a lot more on original content: Disney promised to increase its original spend by $ 2 billion by 2024. Netflix, on the other hand, only recorded $ 13 billion in content last year, with an increasing proportion intended for originals.
Are the streaming wars real?
Financial journalists (myself included) love a story about the contest. Food wars, cola wars, and the "streaming wars" have been spilled. Establishing such a story creates drama and makes it easy for the reader to understand what is happening.
But is it really correct, in the case of streaming, to call a battle in the traditional business sense? Often, these services are supplements rather than substitutes. Many Americans subscribe to multiple streaming services, just as many people pay for both Costco Membership and Amazon Prime. A 2016 survey even found that Amazon Prime subscribers subscribed to Netflix subscribers rather than non-Prime members.
There is a big difference between this competition and those who like Uber and Lyft Carpooling or Apple and Android on smartphones: There, the services and products are clear replacement products, not supplements. If you want an app-based ride through the city, you're probably choosing Uber or Lyft, not both. If you're in the market for a new smartphone, you're probably buying either an iPhone or an android.
Consumers can subscribe both Disney + and Netflix … and a lot will.
Disney + could actually be good for Netflix
There is a shop for which Disney + is a clear negative, and that is traditional pay-TV. If subscribing to the Disney Channel was one of the main reasons why you paid for cable or satellite television, you're more likely to cut the cable now.
Despite discussions about cable cuts in recent years, there are still around 91 million subscribers to satellite and cable television. The slowdown was slow – Hastings predicted 2015 would take at least 20 years to transition – but there are still many more subscribers to satellite and cable services than Netflix, which ended last year with 58.5 million paid subscribers.
While streaming services compete with each other, they also compete with the traditional cable bundle. The more consumers can be persuaded to cut the cable, the more entertainment money is available for streaming services like Netflix. If Disney + and ESPN + accelerate the line editing process, Netflix could actually be a winner.
With the result of Netflix down on April 16, we'll probably hear more of Hasting's thoughts on Disney's new offer, but the Netflix boss had played the threat right from the start. Both services can thrive in the vast global entertainment universe.