Is Netflix Doomed? Here's Why Disney+ Isn't A Netflix Killer Despite What You Might Have Heard
Erik Kain Senior Contributor
Disney+ isn't Netflix's worst nightmare regardless of what the doom-and-gloom crowd says.
Despite what some people are saying, streaming giant Netflix isn't under some sort of existential threat from Disney's new streaming service Disney+, or from any of the other streaming services popping up from old guard media companies like NBC and CBS.
Nor is Netflix going to go belly up now that HBO Max, a service that combines HBO's current offerings with numerous other titles from WarnerMedia's catalogue, including Fresh Prince and Friends, is in the picture.
While it's not exactly good news to lose lose The Office to NBC, Friends to HBO Max or the hefty catalogue of Marvel, Star Wars and other Disney properties to Disney+, nor is it the devastating blow to Netflix that some are claiming—a nightmare come true, if you will. The reality is far less black and white, and far less bleak.
Netflix Isn't The New Cable TV, And Disney+ Isn't The New Netflix
The problem with this argument is that it essentially compares the threat Disney+ or HBO Max poses to Netflix as the threat cord-cutting posed (and still poses) to traditional cable TV. That's a mistake. It's a mistake to see disruption under every corner, though tech bloggers and many analysts like that word so much sometimes they see it when it's not actually there.
Cord-cutting—the act of ditching cable and satellite TV bundles in favor of a la carte internet streaming services—exists because of a massive shift in technology. Netflix, Hulu and other early pioneers of online streaming subscription services represented an entirely new way to watch movies and shows thanks to faster internet speeds and more ubiquitous internet access. The selling points for streaming services, more than anything else, were price and convenience.
Whereas traditional TV had specific air times for its programming and was chock-full of commercials, Netflix allowed you to watch what you wanted whenever you wanted without commercials. Netflix also cost a fraction of the price of cable. A $15/mo Netflix subscription is peanuts compared to a $100 to $150/month cable bill.
In fact, it costs so much less to subscribe to pretty much any of these services that if you were to ditch your cable subscription, you could easily subscribe to Netflix and Disney+ and HBO Max and Amazon Prime and still save money each month. Adding on a $7/month Disney+ subscription to your $15/month Netflix subscription will make sense for many consumers, especially if they're ditching cable in the process. Meanwhile, for many HBO Max will simply be a switch from their current HBO or HBO Now subscription.
Living In Perfect Harmony
Credit: NBC
In other words, Netflix vs Disney+ isn't an either/or proposition. The two can and will coexist—offering up very different content—alongside many other services, because they remain a much cheaper option than traditional TV. Not all these services will survive, of course, but many will.
Different content means you gain value when you subscribe to more than once service at a time. It would be easy to look at Disney+ as merely competition to Netflix, but the two subscriptions will be as complementary as they are competitive. You might have to spend a little more, but you're getting a bunch of entertainment bang for your buck. The fact that Disney+ is cheaper than Netflix doesn't mean people will opt for Disney+, it just means they might be able to afford both.
Clearly there can be more than one winner in this category.
That's even true in the music streaming business. Of course, music streaming differs from video streaming services in a pretty significant way since they offer largely redundant music catalogues, so you only need to subscribe to one in order to have access to pretty much all the music you could ever possibly need. Spotify, Apple Music and all the rest are competing on feature sets as much as anything.
With Netflix and Disney+ content will be anything but redundant. People will subscribe to both in order to watch their favorite content like Stranger Things on Netflix or The Mandalorian on Disney+, and they'll continue to subscribe to Hulu and to Amazon Prime and to HBO Max and so on and so forth, often dropping one for a while and then picking it back up when the new season of their favorite show comes back out. (This is how I handle CBS All Access, for instance).
There's evidence to back this: According to Morgan Stanley, two-thirds of Amazon Prime subscribers still subscribe to Netflix, and a whopping 81% of Hulu subscribers maintain a Netflix subscription. Doubling or tripling down on streaming services can add up, sure, but it's still cheaper and more convenient than cable or satellite TV.
Disney+ Poses More Of A Threat To Traditional TV Providers
If anything, new subscribers to Disney+ will come from existing cable subscribers—especially young families—eager to rid themselves of pricey cable subscriptions. Those same customers may also opt for a new Netflix subscription (or some other service) thanks to the extra cash leftover. Replacing $100+ traditional cable bills with $22 a month for Netflix and Disney+ is a no-brainer. It's cheaper, more convenient and doesn't require a contract.
Not every streaming service will be a success, of course, but Netflix—with close to 150 million subscribers—is hardly the most vulnerable. To say otherwise is to betray a deep misunderstanding of the market in question.
It's possible that more competition will put downward pressure on current pricing, but that's far from a given. Netflix has become so ubiquitous and its properties like Stranger Things, GLOW, and Altered Carbon (to name a few) so infused into our culture, that it would take a lot more than a little healthy competition to send share prices dovetailing.
Meanwhile, Netflix continues to spend more than anyone else on original programming—$8 billion in 2018 and as much as $15 billion in 2019—and has enough popular content to keep customers happy even without Daredevil, Black Panther or Coco. The Office leaving is a blow*, as is Friends' departure, but these are not death blows.
Content Is King (And Queen)
Credit: Disney
Ultimately, Netflix understands the position its in quite well, acknowledging that bigger threats to its business model come from other time-sucks like Fortnite and, well, sleep.
"Our focus is not on Disney+, Amazon or others, but on how we can improve our experience for others," Netflix said in a shareholder letter earlier this year. "We compete with (and lose to) Fortnite more than HBO. When YouTube went down globally for a few minutes in October, our viewing and signups spiked for that time."
CEO Reed Hastings noted that "We compete so broadly with all of these providers, that any one provider entering only makes a difference on the margin."
Netflix is ultimately competing for screen-time. And while it certainly competes with other streaming services in that department, it could very well be that the rise of Fortnite—and other popular games across mobile, PC and console—could cut into that time in more crucial ways than other streaming services. In that sense, YouTube and Twitch also pose a threat despite being a very different kind of product. Still, I don't think any of these pastimes—even something as popular as Fortnite—pose much of a threat to Netflix. Most people enjoy a variety of entertainment options and no one thing will capture all of our screentime.
On the other hand, no company can maintain a stratospheric rise forever, and it's quite possible that Netflix is in for some kind of reckoning, albeit a much milder one than naysayers would have you believe. My money is on a gradual slowdown rather than some catastrophic collapse. Netflix will continue to grow even as Disney+ and other services enter the field, even if that growth is not necessarily as fast as it has been. But the idea that Netflix is doomed because Disney+ is about to launch for $6.99 a month is simply preposterous.
This argument gets the stakes all wrong. It assumes that Netflix is in the same position as cable TV providers and that Disney+ is the new disruptor, when the fact of the matter is that Disney+ is just another platform using the same basic tech, only with a different suite of content. There is nothing disruptive about that from a technological or economic perspective.
Rather, these two services—along with Amazon Prime, Hulu, HBO Max and so forth—will continue to coexist in relative peace and harmony for many years to come. There will be losers, no doubt, but betting against Netflix is a mistake.
* Perhaps Netflix needs to court Michael Shure. It certainly wouldn't hurt to have a Netflix exclusive or two from the man behind Parks & Recreation, Brooklyn 99 and The Good Place.
Erik Kain
I write about video games, TV and movies.