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Disney is the New Disruptor

Disney+ is just getting it done. What does it mean for Disney and Netflix?

May 13, 2022

In the battle for streaming subscribers, the century-old company Disney (NYSE: DIS) appears all but set to eclipse the king of the hill, Netflix (NASDAQ: NFLX). In the recently reported second-quarter 2022 earnings, Disney’s family of streaming services – Disney+, Hulu, and ESPN+ – added 9.2 million subscribers to bring the total subscribers to 205.6 million. Disney’s pace of growth puts it within striking distance of Netflix’s 221.6 million subscribers.

Disney, of course, benefits from the fact that they have a family of services. Among these, Disney+ is doing the heavy lifting, adding 7.9 million subscribers, taking its total to 138 million. And a little over half of those net additions came courtesy of Disney’s Hotstar brand, buoyed by the start of the Indian Premier League cricket season in India.

When we juxtapose Disney’s performance with Netflix, we see the strength of the former’s offering, branding, and strategy. In its recently reported quarter, Netflix’s paid subscriber count went down. Netflix blamed a litany of factors, including macroeconomic conditions, pricing increases, password sharing, and high household penetration in the US market, for its insipid performance. 

And while Netflix is guiding for a further decline in paid members over the second quarter of 2022, Disney put out bullish guidance. Disney’s management expects higher net adds in the second half of the year versus the first half. It appears Disney+ is well on its way to hitting the company’s target of 230 million to 260 million Disney+ subscribers by fiscal ’24.

As I have previously noted, Netflix’s problems became noticeable when competition well and truly arrived. From 2007 to 2019, Netflix had the field to itself. That changes with the launch of Disney+ and a host of other services in 2019. With its treasure trove of intellectual property, Disney already had a leg up on a company like Netflix. 

But Disney didn’t take anything for granted. They priced their services competitively. They meticulously planned for content outside of the US, an area where Netflix has been particularly active. Today, Disney has about 500 shows in the pipeline for non-English speaking demographics. 

Netflix’s Reed Hastings pushed back on an ad-supported tier at his company for years, and only appears to be relenting in the face of receding subscriber numbers. And while Disney+ could potentially increase its prices, it is instead thinking of other monetization opportunities, including advertising. Leaning on its Hulu experience, the company plans to launch an ad-supported Disney+ offering in the US by the end of the calendar year and internationally next year.

Today, the 100-year-old Disney appears to be a much nimbler company than Netflix. The former is raring to go and try out things. Netflix, once the disruptor, seems to be a pale version of its former self.

Does Netflix have it in itself to reinvent, reinvigorate, and give Disney a run for their money?

Or is it game, set, match for Disney? 

Time will tell. 

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