The war for streaming dominance is ON.
Ever since Disney announced its intended acquisition of 21st Century Fox, and Netflix began scooping up producer powerhouses like Shonda Rhimes and Ryan Murphy, the lines were drawn.
Now all that’s left to determine is who the winner will be.
When it comes to appraising the two companies, there is no one simple comparison.
Disney obviously has the history and legacy behind the Walt Disney name, but Netflix has soared to the helm of the streaming industry with no sign of ever slowing down.
However, with its established history, Disney’s financial position is fundamentally sounder, while Netflix has few real assets and its cash flow is negative.
Before you make a decision on which stock to invest, though, please let me continue.
The main difference between Disney and Netflix is essentially that Disney is a company with a brand name product while Netflix is a company that distributes the product.
Additionally, Disney obviously has many more channels of business, what with the amusement parks, movies, etc. while Netflix only has its distribution service.
While that may be all Netflix has, it is by far the dominant giant in the field of streaming.
After Disney announced their purchasing of almost all of 21st Century Fox, their intention to get into the streaming world quickly became evident.
With the addition of Fox, Disney will also be the majority holder of existing streaming service, Hulu.
Disney’s contract with Netflix to showcase Disney movies on Netflix’s service ends in 2019, which, coincidentally, is also when Disney plans to launch their own streaming service.
So, who will reign Supreme of Streaming when that happens?
Well unfortunately for Disney, Netflix already has the position pretty well situated.
While you may argue that at the end of the day, Disney is a powerhouse that Netflix can’t hope to compete with, understand that Netflix already has quite a few advantages that will take a long time for Disney to catch up to.
For starters, Netflix already has 118 million subscribers globally.
When Disney’s streaming service is launched in 2019, they will start with 0, and Netflix will likely have added significantly to their number of subscribers, as they have done every year.
Disney will need at least 32 million global subscribers at $9/ month just to break even, which isn’t an easy feat to accomplish, as showcased by Hulu’s 18 million subscribers and it’s been around for 10 years already.
So clearly Disney has some serious catching up to do before it’ll be a real competitor.
Additionally, Netflix has by far the most data and analytics, concerning what consumers are watching, what content they prefer, when they watch it, etc.
Disney is essentially going in blind without ever having tested its platform direct-to-consumer, so I predict there will be some trial and error with establishing that platform.
Again, though, Disney obviously has legacy on its side, and already has a massive library of Disney content.
Netflix has been increasing their own content over the last couple of years, and have put aside 8 billion dollars to create new content in 2018, on top of its contracts with other creators.
As part of their strategy for pumping out new, groundbreaking content Netflix has signed deals with two Hollywood heavy-hitters, Shonda Rhimes and Ryan Murphy.
The securing of the powerhouse producers also succeeds in impacting Disney, since both producers were under previous contracts with 21st Century Fox networks.
Disney will also be producing new content, behind established franchises like Star Wars and Marvel.
So which company will emerge victorious?
Well, my answer is that both companies can be winners.
That also seems to be the sentiment between the companies themselves, as both Netflix and Disney have repeatedly stated they’re not trying to beat each other out.
Truth be told, this is an environment in which both companies could be, and most likely will be, successful.
Their target audiences are not identical, and people may very well opt to pay for both streaming services, since the content on each will be vastly different.
This is one war in which both sides can, and should, win and all that spells for you the investor is even more profits.
So don’t choose between Disney or Netflix—watch both companies moving forward, assess their strengths and perhaps decide to invest in both.
It’s hard to lose with champions like these.
