Reed Hastings, CEO of Netflix, was right about Disney + – The Motley Fool

Netflix (NASDAQ: NFLX) shareholders should breathe a sigh of relief.

The great unveiling has come Disney+ (NYSE: DIS), the new streaming service from the House of Mouse, but Netflix CEO Reed Hastings seems to have been right all along the course of his potential rival. This is not a deadly threat, nor even a thorn in the foot for the main streamer.

In case you missed it, here are some key facts about the new Disney + service.

• Its launch is scheduled for November 12.
• The service will feature content from Disney Studios, Pixar, Lucasfilm, Marvel Studios and National Geographic; it will also offer 30 seasons of The simpsons, and movies for Twentieth Century Fox's family, like The princess to marry.
• Disney + will cost $ 6.99 a month or $ 69.99 a year; Disney has alluded to a package that includes Hulu and ESPN +.

With such a price, Disney + seems to want to buy Netflix, whose most popular package now costs $ 13 per month. However, as Hastings has already said, there are many opportunities for success for both services.

Hastings's thoughts on Disney

Time and time again, Netflix's CEO was asked about the results calls to share his thoughts on Disney's next streaming service, as well as his concerns about other competitors. But it always eliminates questions, minimizing threats.

Here is what he said there is more than a year after the announcement of Disney's candidacy to Fox:

Then, they also set up a direct Disney service to consumers, which we think will be a great success because Disney has ultra-strong brands. And then, we'll see. We do not see him more as a threat than Hulu was, but it's a great opportunity for them.

Hastings even made a compliment to Disney, saying that he would subscribe to his new service.

More recently, Hastings said in a letter about the profits to shareholders:

We are gaining consumer screen time, both mobile and TV, far from a very large number of competitors. We compete with Fortnite (and lose against) more than HBO … Our goal is not Disney +, Amazon (NASDAQ: AMZN) or others, but how we can improve our experience for our members.

The co-founder of Netflix has always been a little CEO of Big Lebowski of Silicon Valley, regularly appearing as a super cooler and without being worried. But he's right here, and he's been right several times before, especially with regards to the evolution of the streaming industry.

There is a wide range of entertainment options and a single competitor will probably make the difference only in the margins.

What is also remarkable is that Hastings thinks that Disney + will succeed, but he does not think it will affect his company. After the big revelation, you can see why.

There are so many differences between the two services that they are not really direct competitors. Disney +, for example, is family oriented. Netflix wants to have something to offer everyone and its original content applies to the kind of more pointed topics that tend to become bait for Oscars and Emmy Awards. Disney has clearly defined business areas for content creation from its existing studios, while Netflix broadcasts content from around the world in multiple languages, from a wide range of creators, including both programming with or without script. It also means that Netflix will not compete directly with Disney + for content, as is the case with HBO, Hulu and Amazon.

In addition, while the quality of content is more than quantity, Netflix will have a much larger and more diversified library of both services – about two-thirds of Disney's 7,500 television episodes will come directly from Disney Channel. Netflix also plans to spend a lot more on original content: Disney has promised $ 2 billion worth of originals by 2024; Netflix, meanwhile, lost $ 13 billion in content last year, with a growing share of originals.

Are streaming wars real?

Financial journalists (including myself) love the history of competition. The wars of groceries, cola and the "continuous wars" have made much ink flow. Setting up a story like this creates a drama and allows the reader to easily understand what is happening.

But in the case of streaming, is it really accurate to speak of battle in the traditional commercial sense? These services are often complementary to each other, rather than substitutes. Many Americans subscribe to several streaming services, as many people pay at once Costco membership and Amazon Prime. A survey conducted in 2016 even revealed that Amazon Prime subscribers were more likely to subscribe to Netflix than non-premium members.

There is a big difference between this competition and those involving, for example, Uber and Lyft in carpooling, or Apple and Android in smartphones: the services and products offered are clear substitutes and not complements. If you want to browse the city with the help of an app, you probably have a choice between Uber. or Lyft, not both. Similarly, if you are looking for a new smartphone, you can buy an iPhone or an Android.

Consumers can subscribe to both Disney + and Netflix … and many will.

Disney + could be good for Netflix

There is one area for which Disney + is clearly negative, that is traditional pay television. If the Disney Channel subscription is one of the main reasons you paid for cable or satellite TV, you're much more likely to cut the cord now.

Despite all the talk about cord cuts in recent years, there are still about 91 million subscribers on satellite and cable TV. The decline was slow – Hastings had predicted in 2015 that the transition would take at least 20 years – but the number of subscribers to satellite and cable TV services is still higher than that of Netflix, which has completed the 39; last year with 58.5 million national subscribers.

If streaming services compete, they also compete with traditional cable. the higher the number of consumers convinced to cut the cord will be big, the more their entertainment budget will be available for streaming services such as Netflix. In this sense, if Disney + and ESPN + speed up the cord cut process, Netflix could be a winner.

With the release of Netflix's first quarter results on April 16, we will probably hear more about Hastings' comments on Disney's new offer, but Netflix's boss was right to minimize the threat from the start. In the vast world of entertainment, both services can thrive.