Things could not get better for Walt Disney (NYSE: DIS) when she opened the curtain of her new streaming service shortly after the market closed on Thursday. Disney's shares skyrocketed on Friday, reaching the all-time high of four summers ago. Netflix (NASDAQ: NFLX) stocks have fallen.
The fears that Disney + is a killer of Netflix seem exaggerated. This has never been a niche "winner winner", and the success of a new, bright platform should not come at the expense of the fleeing market leader. Let's review some of the reasons why Netflix will go well after Disney launches its new platform in seven months.
1. Disney at $ 6.99 a month is bold but not fatal
There were a lot of surprises at the presentation of Disney's Investor Day, but the biggest turning point – no offense, Homer Simpson – was the aggressive price point. Disney + will be available as an ad-free service for only $ 6.99 per month (reduced to $ 69.99 if paid annually). Netflix recently increased its price to $ 12.99 per month for its most popular package. Disney did not therefore jeered when it announced more than a year ago that it would bill the price of its digital service ahead aggressively.
Yes this That's what scares the market on Netflix. Let's hit the price pinata until colorful candies spring up. Netflix did not compete with prices other than the value proposition of cutting the cord with your cable or satellite provider. Netflix was at $ 7.99 a month five years ago, but after four price increases it is now 63% more expensive.
Four substantial increases in five years may seem like the kind of thing that scares existing and potential subscribers. Amazon.comPrime Video is available for over 100 million Amazon Prime members at no additional cost. Hulu has recently cut prices. This has not slowed down Netflix, its number of subscribers worldwide has gone from 57 million to 139 million over the past five years.
2. Nobody spends more on content than Netflix
There is power in scalability. People continue to flock to Netflix because what spends more on content is growing faster than its prices. Netflix may be 63% more expensive than five years ago, but has gone from $ 3 billion in content to $ 12 billion over this period. Analysts estimate that Netflix revenue is expected to reach $ 15 billion this year. A 63% increase does not seem so bad when Netflix rewards your business with a five-fold budget.
Disney may seem to be making a big bet here, and by the year 2024, he plans to spend $ 2 billion a year on content. It will not be anywhere near Netflix.
3. There are two sides to each projection
Disney expects to have between 60 and 90 million Disney + subscribers in five years. Given the current catalog of the media giant, which offers premium content and surprisingly low prices, it would not be surprising that it is conservative. However, do not make the mistake of comparing 60 million or 90 million to the 139.26 million streaming accounts that Netflix was managing at the end of last year.
Netflix is expected to have a much larger audience by fiscal year 2024. Its own early-year forecast predicted the 148 million streaming subscribers at the beginning of this month. Netflix is just starting to scratch the surface in major international markets. Disney will be relevant, but Netflix will have more than 200 million subscribers and will probably generate six to eight times Disney + revenue in five years.
Disney + will be very popular during its launches later this year and is likely to hurt some of Netflix's current subscribers. However, much of Disney +'s traffic will come from young families who have freed themselves from expensive cable TV packages now that they no longer have to pay triple-digit bills just to get Disney Channel.
Much of this money will be spread around existing services, including Netflix. If you do not think that Netflix will be more popular in a year, despite the arrival of powerful new services, you are not paying attention to the trend.