Wednesday, August 16, 2017

(The Big Disrupt) Netflix: Why Disney Are No Real Threat To Netflix

With the news of Disney's plans to remove all their film content from Netflix and launch two streaming services in the next two years, there has been a lot of talk that this could be a major threat to Netflix dominance of the SVOD market but, in truth, Disney planned entrance into the marketplace should not keep Netflix executives awake at night. 

However, that's not to say that they shouldn't take notice. Disney has arguably the strongest and most prized content library ever and should it's planned ESPN or Disney movies streaming services take off, Netflix could have a real problem on its hands. The last thing Netflix needs is to find itself competing with a company that's nearly twice its size with a larger content library and deeper pockets as it already has Amazon, a company four times its size by market cap with even deep pockets than Disney, breathing down its neck forcing them to spend even more money on licensing and creating original content at increasingly unsustainable levels.   

With Amazon and now Disney nipping at its heels, Netflix are increasingly looking like a company that's skilfully punching above its weight against opponents who simply have to stay in the fight long enough to pick them off in the later rounds. Yet despite being smaller than both these great companies, Netflix will likely see off the threat posed by Disney. Netflix is an incredibly well-run operation with a large content library, a growing stable of popular and critically acclaimed shows it produces itself not to mention 104 million subscribers globally but the reason why Disney are going to have a hard time knocking Netflix off top spot or even making a dent in its dominance is Netflix have a considerable head start it simply isn't going to give up. 

The reason why Netflix are so far ahead of everybody else in the SVOD marketplace is because they're better at retaining subscribers thanks to the data they collect about customer viewing preferences which allows them to create shows that reach large demographics inside and outside their platform (thus attracting new subscribers) and suggest other content on their platform subscribers may enjoy based on past viewing which has the effect of keeping customers on the platform to the point that Netflix is starting to compete with something we all love, sleep. 

Because of this, Disney will have a hard time taking customers from Netflix which won't be much of a problem for its ESPN streaming service as it will serve a different audience entirely but for its movie based streaming service, it's crucial that it takes customers off the Los Gatos based company or at least force customers to cough up a little extra from their pocketbook for their service. 

If Disney's movie streaming service can't pull this off, it will die a slow and expensive death. In truth, the real story however is Disney finally entering the sports streaming marketplace which puts it in direct competition with Amazon who acquired rights to stream Thursday night NFL games for prime subscribers which should give everybody at Disney and ESPN sleepless nights. While Disney can use ESPN's declining but still large Pay TV subscriber base promote the service, it will be going up against a company that has rights to stream NFL content to an extremely loyal customer base that's growing a year ahead of its launch. 

By that time, Amazon will have established a head start it won't give up with by far the most popular and lucrative sports content on the market. To make things worse, Facebook is expanding its live sports offering which means Disney and ESPN's already large sports programming costs are going to shoot up at a time where ESPN's large content spend is getting harder to justify. 

What all this means is that Disney is the last of Netflix's problems as Disney's move into the SVOD space smells of desperation.

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