Streaming Wars: Episode II

By Rupert Burnham | June 24, 2019

The streaming marketplace is undergoing radical changes, and after years of market dominance by Netflix, there are now some heavyweight contenders to the crown, notably Disney+ and Apple TV+.


Both have serious clout, particularly Disney in terms of market size, revenue, content, and licenses, and Apple in terms of brand power. But there can be too much of a good thing. A raft of new services and content could herald a golden age of content, or result in a flooded marketplace and an accompanying spike in piracy. Each of the three main contenders has much to like, let’s start with Disney.


The mouse powerhouse
Disney+ will most likely debut after Apple TV+, but the Walt Disney Company has been busy. Earlier this year Disney completed its $71bn (£54bn) acquisition of Rupert Murdoch’s entertainment business, 21st Century Fox. If content is king, this is seismic. Before the takeover, Disney already boasted a fearsome catalogue of content, including its classic cartoons, Star Wars and many of the Marvel characters. With this deal it has added the likes of X-Men and Deadpool to its portfolio. As part of the deal Fox film and TV studios, the FX networks, National Geographic and the Indian TV giant Star India have joined the Mouse House stable in a huge boost to its content. It now has an unrivalled slate of franchises including Cinderella, Marvel, The Simpsons and Star Wars in its empire.


But the deal is more important than content alone. It helps Disney to further control of its TV shows and movies from start to finish — from creating the programmes to distributing them through television channels, cinemas, streaming services and other ways in which people watch entertainment. With shows like Stranger Things, Orange is the New Black and many more, Netflix is well aware of the advantage this approach gives. But this deal will also allow Disney to further mimic Netflix in giving them the ability to gather valuable data on customers and their entertainment-viewing habits. This can be used to aid in the creation of new shows and also be used to sell advertising.

As if the acquisition of 21st Century Fox weren’t enough, Disney also doubled its 30% stake in streaming service Hulu with its 25 million subscribers. It is now by far the biggest stakeholder, with Comcast holding on to 30%. These recent acquisitions put The Walt Disney Company in a very strong position with Disney+ given that there are already some 89 million Disney Channel subscribers out there.

It’s not all a bed of roses for Disney though. They’ll forgo profits of approximately $1bn this year, and $2bn annually from 2020, as it stops licensing its films to Netflix and starts investing in original shows for Disney+. There are also costly investments in Hulu to consider as well.

But this is a calculated move. Disney is willing to sacrifice short term profits for two good reasons. The expected returns from streaming and the increasing vulnerability of its current business. The rise of Netflix and competitors has meant that consumers are watching less pay-tv and not subscribing to its overpriced packages. They’re also making fewer trips to the cinema (meaning Disney’s box office dominance counts for less) — though the reasons for this are many. There’s a reason for Murdoch wanting to offload much of Fox and Disney wanting to acquire it. Without must have content Fox would have to confront demands from distributors to lower its prices, whereas Disney views the studios and networks as a rich vein of valuable assets to acquire and add to its roster to stream on Disney+.

We’re going to need a bigger boat
So Disney looks to be in a strong position, but what about the recently announced new kid on the block, Apple TV+? Aside from a very similar name, what’ve they got that the others haven’t? Scheduled to launch next Autumn, March’s announcement certainly came with a bang. In typical Apple fashion, the launch was announced at a heavily star-studded media event featuring Oprah Winfrey, Steven Spielberg, J.J. Abrams, Reese Witherspoon, and Big Bird amongst others. They were on stage to share snippets of new creative projects that will be released through the new streaming platform. Shows in the works include; The Morning Show, a drama about a morning broadcast program starring Reese Witherspoon, Jennifer Aniston and Steve Carell, Amazing Stories (a science fiction magazine that inspired the director as a child), an anthology series from Steven Spielberg's Amblin Television and NBC Universal and See, a sci-fi drama starring Jason Momoa. As for Oprah Winfrey, she has two documentaries in the works, as well as a new format for her book club.

Impressive stuff, and as Winfrey said at the event “They’re in a billion pockets, folks...The whole world’s got them in its hand, and that represents a major opportunity.” More than that though Apple is one of the world’s most recognisable (and valuable) brands with all the premium connotations that it has.

It also has a tendency (and the monetary firepower) to succeed. Just look at Apple Music which is hot on the heels of Spotify and ahead in the U.S having come late to the party. It also started the year with a net cash balance of $130 billion, an impressive war chest and bigger than its competitors. They’ve also been spending big, pouring some $2bn into original shows with some of Hollywood’s biggest directors and stars.

Heavyweight champion of the world
That may seem like a lot of spending but consider Netflix. They’re expected to spend some $15bn this year on original and licensed content to entice and add to its current 148.2 million paying, global subscribers as of the end of March 2019.

Such a large established audience puts Netflix in a prime and enviable position. When Apple TV+ finally launches in the second half of this year, potentially Netflix could have more than 150 million paying subscribers worldwide. Any contenders to the streaming crown have their work cut out and a lot of ground to make up before they can seriously challenge Netflix.

Netflix isn’t just in the lead in terms of subscribers though, it’s been perfecting its craft for well over a decade now. Its algorithms are adept at working out what viewers want and it can successfully use the data it gathers to create hit shows. It also has the infrastructure in place to deliver its service to ever more people, and through the sharing of passwords it's probably going to acquire a lot more subscribers.

Catch me if you can
Such is Netflix’s dominance of the market in terms of subscribers and levels of spending on content, that despite the impressive list of franchises and content that Disney has or the brand power of Apple, the smart money is Netflix maintaining its dominant position for some time yet. Either way, the market place is about to become more crowded. This could herald a new golden age of content as each service tries to outdo its competition, all of them having deep enough pockets to finance star-studded projects. Or the increase in the number of services could mark a period of increased piracy as we discussed in a previous post due to consumers being unwilling to subscribe to all of the services to watch the content they want to.

Tags: disney film fox netflix svod tv tvseries