Why Disney Has a Stranglehold on the Streaming Industry
They may not be far from catching Netflix
Photo by Kon Karampelas on Unsplash
In the entertainment world, market share is key. Unlike most other industries, where consumers can bounce around to different companies for different goods and services, entertainment comes at the cost of both money and time.
While money can be re-earned after it is lost, time cannot, making it our most valuable commodity.
In a 24-hour day, only so much time can be spent on entertainment. There are certainly people spending almost all their waking hours consuming content — whether it be a child or an adult that has somehow cracked the code on life. But most people can only dedicate their full attention to something for so long before other priorities get in the way.
This makes the life of an entertainment company hard, depending on the specific faction of the industry. A sports team essentially has a monopoly on a fan’s attention. Nothing is getting in the way of a true fan sitting down and watching their team play. And most of the time, it doesn’t take too much convincing to get them to show up for live events.
Everyone else, though, has their work cut out.
There are only so many movies one can see in a theatre and only so many TV shows a person can watch. Convincing the consumer that this movie or that TV show is the thing they need to spend their time on is an extreme challenge because there are a handful of other large media conglomerates attempting to do the same.
This challenge became increasingly more difficult once streaming services entered the fold.
Netflix, of course, didn’t begin as a streaming company. It was a subscription model; the company offered a pay-for-rent service, mailing subscribers movie titles to be played on home DVD players.
Six years after its founding, the company reached one million subscribers. Four years after that, Netflix mailed its billionth DVD in the same year that it announced its move to online streaming.
The company did have early challengers, such as Amazon Video, Hulu, and Vudu. But thanks to its 10 years of relationship-building with the consumer, establishing itself as a hub for content delivery, Netflix was always a leg up.
At the beginning of 2013, Netflix started streaming House of Cards, its first original content. The show was very popular among subscribers at the time.
Netflix has continued to make original content, releasing shows such as Narcos, Stranger Things, and Ozark. They have also made movies such as Roma, Bird Box, and The Irishman.
Netflix spends over $10 billion a year on original content and is seeing a return on this investment: the company is closing in on 200 million paid subscribers.
This build-up has taken a long time for Netflix, but they do not own the streaming landscape any longer.
Netflix would have never gotten to this point without using other companies’ content. And in recent years, those companies have realized that, reclaiming their content and putting it on their own streaming services.
Popular sitcom Friends, which Netflix paid $80 million for just one year of rights in 2018, moved to AT&T’s HBO Max this year. The Office, another immensely popular sitcom, will be off of Netflix in 2021.
This is not terrible for Netlflix — it gives them more resources to create new, original content rather than relying on old (yet popular) shows owned by other companies. It gives them an opportunity to create more of an edge and expand their own personal library.
The shift in streaming from the heavily-concentrated marketplace on Netflix to newer platforms does make things interesting, however, and the door to a new-look entertainment landscape has opened.
Well, it was opened. COVID-19 completely blew that door off its hinges.
Thanks to the pandemic, all streaming services have seen an uptick in new subscribers. Disney+ has been one of the largest beneficiaries, growing to over 60 million subscribers (as of early August) — a growth of about 10 million since April.
When throwing in Hulu (35.5 million subscribers) and ESPN+ (8.5 million), which the company offers alongside Disney+ for $12.99 per month, Disney owns over 100 million streaming subscribers.
Disney boasts a broad library of content, including the Pixar, Marvel, and Star Wars franchises alongside National Geographic. Young adults can reminisce about their childhood watching Hannah Montana or High School Musical while kids can watch Bizaardvark or Frozen.
While Disney may spend less on original content than Netflix, Amazon, and AT&T, it still planned to spend $1 billion this year and has decades of built-up nostalgia to fall back on.
Nostalgia only lasts so long, though, and Disney knows that. That’s why they recently announced a shift in their entertainment focus to streaming.
With COVID hurting Disney’s theatrical business and parks still being closed or limited worldwide, the shift to its streaming platforms was accelerated. The release of Mulan on Disney+ was perhaps a signal for how things may look in the future.
While theatres won’t be closed forever, how movies are delivered to consumers may be.
Even once life returns to normal and theatres reopen, companies like Disney can leverage new releases into attracting subscribers. Greyhound, the Tom Hanks film released on Apple TV+ in July, saw 30% of its viewership come from new subscribers. Netflix has attracted new subscribers with original content for years.
The theatre experience of action-packed films such as those from the Star Wars and Marvel franchises cannot be felt at home (unless you have a decked-out home theatre), making it very unlikely to see Disney+ exclusivity there.
Trying to draw in new subs with animated films would be an interesting experiment, however, and hopefully the company will discuss the impact of Mulan’s stream-only availability on subscription growth in its next earnings report.
While Disney is unique in streaming in that it has three different services packaged into one, Disney+ is unquestionably its biggest attraction. ESPN+ is cool for sports diehards but doesn’t offer any necessary coverage. Hulu’s live TV option helps boost its offerings, though, and perhaps that will be something interesting to track as cord-cutting continues to accelerate.
With Disney’s shift to a streaming focus, Disney+ does have a shot at giving Netflix a run for its money. Disney+has less than one-third of Netflix’s subscribers, but has crushed subscription goals thus far and is just shy of a year of operation. The potential of a larger investment in original content and movie exclusivity gives Disney a pathway to gobbling up market share over the coming years.
Netflix is where it is for a reason. It has spent over 20 years giving subscribers convenient access to content at a fair price. Disney owns the hearts of millions and millions worldwide, however, and is not afraid to pull at those heartstrings whenever necessary.
If Disney makes a larger commitment to original content and makes Hulu and ESPN+ even more appealing, it will have an offering no other streaming service can match.