Disney vs. Netflix: Can Bob Iger Challenge the Streaming Giant?

Moana Stranger Things
Disney/Netflix

If content is king, then Disney’s gamble on a launch of its own OTT service to compete with its digital rivals represents perhaps the biggest test in decades for Disney’s storied studio productions.

While Disney CEO Bob Iger offered plenty of detail about the company’s upcoming ESPN-branded service in a recent earnings call, questions remain about the other Disney-branded venture he unveiled earlier this week. All he indicated was that the streaming service will feature the Disney and Pixar titles Iger is pulling off Netflix, supplemented by an unspecified mix of original film and TV content. The subscription price has not been announced.

“We’ve already begun the development process at the Disney Channel and at the studio to create original TV series and original movies for this service,” Iger said. “We’ve commissioned them to produce more films, with the incremental films being produced very, very specifically and very exclusively for this service. So this will represent a larger investment in Disney-branded intellectual property, both TV and movies.”

While Iger pledged to share more of his plans in the coming months, just how much Disney will spend on the increased production is unknown. But some say that the Mouse House’s dominance at the box office year after year and its vast library of IP gives them confidence Disney could get competitive in the battle for on-demand viewers.

While Netflix and Amazon have cornered much of the video-streaming market with tons of TV hits like “Stranger Things,” the relatively early state of their film slates could create space for Disney to charge into with its vaunted film production capabilities.

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“No one’s been able to have the water cooler level of success on film yet,” said Daniel Salmon, a BMO Capital Markets analyst who tracks Disney. “We still have that moment to come.”

The strength of Netflix’s offerings lies in the broad appeal of its content, drawing young families as power users, as well as offering adult-themed fare. Disney’s streaming service, on the other hand, is likely to target young families – at least at first, Salmon said. Disney has not said yet whether Marvel and Lucasfilm titles might eventually be added to the service and the company is currently negotiating with Netflix the renewal of those streaming rights.

While Disney might see Netflix as its largest competitor, “it would be silly to assume that Disney product can get to that sort of broad appeal,” Salmon said. That said, “Disney’s advantage is that it has multiple brands in its stable that are at the top.”

Justin Patterson, a Raymond James analyst who tracks Netflix, said that while Disney’s announcement may have caused Netflix shares to stumble, he believes Netflix will ultimately be able to make up for the loss of popular Disney titles like “Zootopia,” “Moana,” and “Finding Dory.”

“They’re fairly diversified to weather that storm,” he said.

On the film front, however, Patterson said it’s only a matter of time before Netflix creates a hit because right now “they don’t have anything that compares to the Disney library.”

Still, he’s aware Disney’s content has been king for many years. Since 2012, Disney has boasted the top film in five of those six years. “Disney and Time Warner movies are ones I don’t bet against,” Patterson said.

While many are drawing comparisons to Netflix, Disney’s OTT service could end up more like the CBS All Access model, the network’s foray into direct-to-consumer streaming. The service counts 8,500 TV episodes in its library and exclusive spinoffs like “The Good Wife” and shows like the forthcoming “Star Trek: Discovery.”

Hal Vogel, CEO of Vogel Capital Management, said one of the benefits of streaming directly to consumers will be the ability to gather viewing habits, creating data that can potentially help Disney better tailor its content.

“What you’re getting with the new model is direct-to-consumer information,” Vogel said. “Not only money is being made, but you’re acquiring big data on your customers. The cable services right now have that data.”

Disney might also pave the way for other film studios and their parent companies to do the same: “All of the other studios will be paying close attention to the Disney experiment. My guess is eventually they will all go to this model,” said Vogel, adding that “the world is moving toward big data and having a direct relationship with your consumers.”

Brent Lang contributed to this report. 

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  1. nerdrage says:

    Content isn’t king. Distribution is king. Envision a word in which there are billions of streaming customers (that potential exists right now, especially with cell phone proliferation), where streaming services have a database full of these customers who they charge $10/month in perpetuity. The services have a great deal of control over what content is marketed to these customers, having control over their home pages, alerts, emails, texts…all basically zero cost marketing.

    Now that’s power. And that’s what is causing the current frenzy. The likes of Disney have realized if they don’t get off their asses now, the likes of Netflix will own this future. Disney may have quite a few brands with great selling power but it can’t have escaped their notice that Netflix can just pluck something out of the mass, like 13 Reasons Why or GLOW, and suddenly create a brand new sensation that attracts paying customers. If Netflix can do that, why can’t Amazon, why can’t Hulu, why can’t anyone? Disney needs to put a stop to this nonsense before it gets out of control and suddenly they are left in a relatively powerless position, competing for space on Netflix’s “alerts” icon with everybody else in the world who has an idea for a show.

  2. Nan says:

    If Disney keeps the price low, they will be in every house in America. HBO’s service is too high so it’s not as popular. If Disney does $5 a month, they will make a fortune!

    • nerdrage says:

      The difference between $5 and $15 is much less than the difference between $0 and $5. Meaning, the biggest obstacle to Disney is not HBO but indifference. Why bother to may $5? Why bother to pay a penny? Netflix and Amazon have plenty of content, why bother with Disney at all?

  3. robncaruso says:

    Years ago when MGM, FOX, RKO had to divest all of their exhibition venues because of antitrust and monopoly business behavior. Today, anything goes! When you have Netflix and Amazon getting into producing and distribution, they stepped into the studios territory. But with the media giants, Comcast(Universal, NBC, Theme Parks, etc.) Disney (ABC, Marvel, Lucas, Theme Parks, etc.) Viacom (CBS, Showtime, Paramount Pictures) and many more conglomerates diversifying. Maybe the government needs to step in, but in this day of Lobbyist, Special Interest Groups and to beat all Amazon who owns the local Paper (The Washington Post) having an inside track to Congress! People eventually will get fed up with being Nickel and Dimed for each separate service, Eventually both parties will lose!

    • nerdrage says:

      Are you kidding, I’d be happy if the fools in charge of our government don’t destroy our health care system and get us all blown up in a nuclear war. The last thing I want is them meddling in the TV shows I watch. Trump doesn’t have a good track record for making anything that’s worth bothering with.

  4. Bangarang says:

    I don’t know why people are getting their panties in a bunch over this. You don’t HAVE TO subscribe to anything, you could try getting out of the house and spending more time with family and friends, going on trips, interacting with people…you know, things we used to do before streaming and being glued to smartphones took over? And the best part, it’s free!

  5. Bas says:

    If this model is the future then distributors like AT&T, Comcast, Verizon, Charter and even online rival Netflix ownine content providers is also the Future.

  6. XVB1 says:

    I’m sure both services can co-exist well enough, but Netflix needs Disney more than Disney needs Netflix. And when it comes to children’s programming, Disney can’t be touched. Huge swaths of their back catalogue — dating back DECADES — is still perfectly suitable for showing to young people from toddlers to teens, and a lot of it has been mothballed for years now. Not talking about the animated movies, but the decades worth of live-action movies, World of Disney TV series and movies and specials, animated shorts, documentaries from the 1940’s through to today. No need for Netflix, which will do just fine, but I can see a lot of people bitching about being forced to add another fee to get the Disney content, while others will be more than happy, especially if there’s a better chance of shows not getting yanked from availability because licenses expire.

    • XVB1 says:

      Of course, when all the OTHER major studios with vast back catalogues and current releases end up doing the same thing, most users will probably be shelling out MORE than they ever did for a cable or satellite service back in the day.

  7. I agree that this is a model that everyone will be moving toward.

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