Disney locks horns with Netflix by announcing aggressive OTT strategy6 min read

January 6, 2021

Disney locks horns with Netflix by announcing aggressive OTT strategy6 min read

In this modern age, people are in a rush and they seek everything on the go, right from their coffee to entertainment. In the past few years, OTT (over the top) platforms have become increasingly popular around the world, given the advertisement-free content that they offer and an option to access it from any device – TVs, smartphones, Laptops, and so on.

The visual content space that was solely occupied by the 70 mm screens and LED TVs is now further compressed to our mobile phones, and people are preferring OTT platforms such as Netflix, Disney + Hotstar, Hulu, Zee5, Amazon Prime, etc.

Disney, in its annual investor meeting, announced its plans to ramp up the OTT space, which will give head-on competition to OTT giant Netflix.

Disney’s blockbuster forecasts

As the pandemic-packed 2020 came to an end, Walt Disney’s in-person dependent business, from movies to theme parks, came to a standstill. On Dec 10, 2020, at its annual investor meeting, Disney said it sees the business model moving to an OTT one like Netflix rather than the traditional media company that was there for over a century.

Disney’s management increased their projections for Disney + — subscribers by nearly three times by 2024. The company now reportedly expects to have as many as 230-260 mln subscribers globally across all its services within four years.

When the media conglomerate launched its Disney+ streaming service towards the end of 2019, it forecasted that it would reach 60 to 90 mln subscribers by the end of 2024.

However, the Covid-19 pandemic turned the tables for the media giant and Disney’s OTT service now has over 87 mln subscribers globally.

Walt Disney, in its investor meet event, previewed the series and films that are planned for the coming years which includes shows on Disney, Star Wars, Marvel, National Geographic, and Pixar that would directly land on Disney +.

Disney has decided to officially play the streaming video game at a different level as it plans to roll out shows for Disney +, and further expand with the help of Marvel, Star Wars, Pixar.

Netflix – The Showstopper

Netflix was the first mover in the subscription-based video streaming industry, with the company spending massive cash on content with the goal of attracting more and more subscribers. This was undoubtedly the right strategic move early on because the company faced no competition in streaming. Now, Netflix is able to spend more than its peers while spreading the cost over a much larger subscriber base.

Netflix currently has around 200 mln subscribers in over 190 countries, making it a leading subscription-based video streaming company.

If we look at its journey, Netflix has reportedly spent $37 bln on creating content only while the companies that are large in the streaming space have other businesses in addition to OTT i.e Disney +, Amazon Prime, Apple TV +, and so on.

Another advantage that Netflix had, is to recognise the potential of the internet and the growing usage of technology across the planet that will fundamentally change the way people consume content. The era of daily soaps was coming to an end and this bet of Netflix proved to be fruitful and hence it is far ahead of newer players eyeing a market share in the OTT space.

Disney vs Netflix

The OTT space is becoming competitive given the immense potential it holds and new entrants in the space that are chasing market share. Traditional media and entertainment behemoths like Disney are putting up a fight as they begin focusing intensely on streaming.

As of now, the OTT shark Netflix has 200 mln subscribers, as per media reports. Whereas, Disney has projected to have 230 mln-260 mln Disney+ subscribers by 2024, up from its prior estimate of 60 mln-90 mln for the same time frame, with global subscriptions across all services reaching 300 mln-350 mln.

The announcements in Disney’s investor presentation included forthcoming offerings from Marvel, Star Wars, and Pixar, generating frenetic social media chatter among fans of the franchise. Disney has strategically announced a platter of upcoming launches that will help retain its top spot of the entertainment food chain for upcoming years.

The presentation also left zero doubt that the company would double down on its Disney Plus streaming service as it seeks to dethrone streaming mammoths such as Netflix, particularly at a time of continued uncertainty for movie theaters and other live entertainment, which was the company’s core business.

As per media reports, compared to Disney, Netflix has ended its most recent quarter with 195 mln subscribers worldwide. It spent $15 billion on content last year, 13 years after launching. No other streaming service is reportedly close to Disney or Netflix in their planned spending or ambitions for subscribership.

Disney will leverage its intellectual property of superhero movies and its characters such as Ant Man, Iron Man, Hulk, and so on to feature them in movies and series on Disney + so that the subscriber base increases.

Stock Movement

The streaming media giant Netflix’s stock was up by 65% in 2020, and the company is currently worth $231 billion, with nearly 200 mln subscribers.

After Disney’s annual investor presentation the company’s shares were up more than 10% post the announcement.

As per media reports, analyst firm MoffettNathanson said Disney’s stock should be seen as being in the same league as tech giants like Facebook, Amazon, Apple, Netflix, or Alphabet—aka FAANG stocks.

“Given the meaningful opportunity ahead for Disney’s streaming business, we believe the stock should be considered as in the same camp as other fast-growing internet companies (the FAANGs) or consumer companies like Walmart/Nike,” the analysts said.

Many movie industry stocks ended 2020 lower than 2019, despite the gain in the broader S&P 500 index, especially the movie theater stocks were the biggest losers among the lot given the pandemic-driven slowdown.

However, subscriber-based streaming stocks such as Netflix, device maker Roku and music streamer Spotify got further boosts amid stay-at-home orders from around the world. And thanks to the early success of its Disney+ streaming service, which hit 86.8 mln subscribers as of early December, the Walt Disney Co. was the biggest gainer among big Hollywood powerhouses.

Despite the Covid-19 induced lockdown and Disney’s theme park business being hit hard, the Disney + business sailed its boat. Before the final trading day of 2020, Disney shares were up 24.3% at $181.75.

Indian Context

If we look at the OTT situation in India, along with Netflix, Amazon Prime, Disney + Hotstar many local platforms such as Alt Balaji, Sony Liv, Zee5, Voot, and so on are also becoming increasingly popular given the exclusive content that they offer.

Since the movie theatres were closed for over nine months, films were released on OTT platforms which was a big boost for OTT in India.

Many series and films were released on OTT platforms which were the talk of the town such as Scam 1992 on Sony Liv, Mirzapur, Gulabo Sitabo, etc on Amazon Prime, series like Churails on Zee5, Jamtara, Suitable Boy, etc on Netflix ensured that every OTT platform had its share of the cake.

It will be interesting to see who manages to maintain its place on top of the pyramid in terms of subscriber-based streaming platforms in India.