The fan frenzy surrounding the freshly released teaser for Star Wars: Episode IX – The Rise of Skywalker serves as a timely reminder of Disney’s omnipotence at the box office. Now it is setting its sights on the small screen as well, by tackling global leader Netflix in the battle of the streaming services.
The company is banking on what it terms a “treasure trove” of assets to make its upcoming rival service, Disney+, a Netflix-killer. These span the Star Wars films; the Marvel universe of comic book franchises, including the Avengers and the X-Men series; Pixar films such as Toy Story and Finding Nemo; and its own animated output, including Frozen and The Lion King, and TV hits such as The Simpsons.
Netflix has until now shown a clean pair of heels to all-comers, but is facing a much stiffer test as the Hollywood studios pull their content to boost their own planned rival streaming services.
Also gearing up for streaming launches are: WarnerMedia, which owns studio Warner Bros (Lord of the Rings, The Lego Movie), HBO, and the rights to Netflix’s biggest show, Friends; and Comcast’s NBC Universal, owner of the US version of The Office – another Netflix hit – as well as Jurassic World and Fast and Furious maker Universal.
“Netflix’s content balance act continues to appear precarious,” says Michael Pachter, analyst at Wedbush Securities. “Over the next 12 months, we expect a large quantity of existing Netflix content to migrate away from the service. We estimate that these studios provide around 20% of Netflix’s overall content measured by available hours, and closer to 40% of hours viewed on the service.
“By the end of 2020, we expect all of this programming to have disappeared from Netflix, and we think the company will find replacing the content with originals a daunting task.”
Netflix is racing to commission its own programming to fill the looming void: it is focusing more than 85% of new spending on original content, and is expected to spend as much as $15bn on making and licensing film and TV shows this year.
Nevertheless, Netflix’s willingness to pay $100m to keep Friends for one more year, having previously paid about $30m a year, highlights the value of crowd-pulling content and the level of threat the streaming service knows it is facing.
Disney is gambling billions of dollar on the hope that it can catch up with Netflix, which has almost 150 million global subscribers. Disney+ will launch in the US in November, priced at $6.99 a month (Netflix’s most popular plan is $10.99), followed by rapid international expansion.
Keeping its content exclusive will cost Disney about $150m in licensing revenues this year, and $350m a year after that. Its original content budget, spent on fare such as TV spinoffs of Marvel and Star Wars, will rise to $2bn a year on 50 original series. Disney+ won’t make a profit until 2024 – if it can hit a target of between 60 and 90 million global subscribers.
Richard Broughton of Ampere Analysis doesn’t see Disney+ as a Netflix killer. “Netflix is diversifying away from its reliance on the big studios,” he says. “It is the largest commissioner of TV series in the world at the moment. Disney will certainly place more pressure on Netflix, but it has enough big tentpole titles to keep its subscribers watching.”
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