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On Thursday, Disney unveiled the main details of its upcoming streaming service, Disney Plus, and following the phrase "Netflix killer" was launched in articles and on social media.
It's easy to see why.
Disney Plus has an attractive price ($ 6.99 per month or $ 69.99 per year) and the type of high-end intellectual property dreamed of by other entertainment companies. Netflix's CEO, Reed Hastings, should not he be shaking now?
The answer is "no" and there is a simple reason. The word "killer" implies that in this deadly fight, a single banner can survive. But that's not the way the streaming market has worked so far.
The truth is that there is historically a high degree of overlap between streaming service subscribers such as Netflix, Hulu, Amazon Prime and HBO Now. A study by Parks Associates late last year found that 36% of US broadband households subscribed to two or more streaming video services.
Most people do not watch a new video service, such as Disney Plus, and ask themselves, "Do I have to cancel Netflix and make this service the only streaming service I subscribe to?"
The streaming market is still a free market for everyone, but when the dust clears, most industry leaders and analysts expect the average consumer to subscribe to two to four services.
Netflix, in its current state, is clearly the number 1 with over 139 million paid subscribers in the world. No one else is even close. So the real battle is who will occupy slots 2 to 4. And that means that even though Netflix should not consider Disney Plus as an existential threat, some services should, especially those that are not yet launched.
$ 6.99 is an affordable price
One of the main reasons for the Netflix-killer label is that Disney has aggressively valued its service at $ 6.99 per month ($ 5.83 if you pay for a year). Netflix, which has recently increased its price, therefore has a basic entry plan of $ 8.99 and a standard plan of $ 12.99.
Disney's price puts pressure on Netflix, but it's also a validation of Netflix's overall strategy. Netflix has bet that reaching the massive global scale as quickly as possible will keep the business model running. That's why it has consistently provided consumers with greater value than alternatives such as cable TV and billions of dollars in negative free cash flow.
By awarding a $ 6.99 prize to Disney Plus and being prepared to bear losses in billions by at least 2024, Disney follows a similar game book.
You can also see that this reflection is reflected in Hulu's strategy, of which Disney now holds 60%. Hulu has spread its advertising-funded level to boost the growth in the number of subscribers, and it has worked. Hulu was the fastest growing streaming service in the US last year.
At Business Insider's Ignition conference in December, Hulu CEO Randy Freer emphasized that it is of paramount importance to reach this goal for Hulu and for streaming services in general. Disney is clearly in agreement.
Who should be worried?
If the scale is of such importance, the services that should really worry about Disney Plus are those that do not have it yet.
This is especially the case for those who have not yet done so, such as Apple TV Plus and WarnerMedia's upcoming service, or for those who only have a few million subscribers, like CBS. All Access.
If Disney Plus becomes a staple for streamers in the same way as Netflix, this is one more location for many consumers, further complicating the work of others.
Other players that should be concerned are traditional pay-TV companies and new digital companies (YouTube TV, DirecTV Now, Sling TV, etc.).
The addition of Disney Plus and the increased investment in original programs at venues such as Netflix, Hulu and HBO make the switch from the traditional package an even more attractive option for customers. This could accelerate the reduction of the live pay-TV offer, mainly from news and sports, the "entertainment" programs existing mainly in the world of streaming on demand.
Netflix has mastered the spirit of the times
Shooting Netflix content is a blow, and Mouse House's iconic TV shows and movies have certainly helped Netflix on a scale.
But Netflix has gained enough time with the licensed content to create both a scale and a beloved brand. The transition to most originals will cause pain in Netflix, but its ubiquity in pop culture will support it.
As I wrote in January, Netflix has reached such a scale that its original content – from Marie Kondo's show to "You", to a documentary about the Fyre music festival – can enter the atmosphere in such a way to create a tangible sense of FOMO in those who are not subscribers. Disney is not going to destroy that by removing its movies and TV shows from the service.
There will be good debates in the coming months on the level at which increased competition from new services such as Disney Plus is hindering Netflix's growth or margins. But this is not a killer of Netflix. It's just too late for that.
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