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

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.

“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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