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Will the entry of the highly anticipated Disney+ change the dynamics of the video streaming industry?


  • Overview of the global video streaming industry
  • Entry of Disney+ and comparison with other similar platforms
  • Future outlook of the video streaming industry

 

Media consumption globally in recent years has undergone a revolution wherein it is being increasingly consumed through the digital format. This transition has pushed the global video streaming industry to new heights, with the industry reporting revenues of approximately $23 billion as of 2018, registering a growth of 15% from that of 2017. The reading is expected to reach ~$25 billion by 2019 and over $28 billion by 2023, with subscribers for streaming video on demand reaching 1 billion by 2019. This surge in the growth of the video streaming industry in the recent years has been because of the shift from cable and satellite TV in favor of an a la carte internet streaming service such as Netflix, Hulu, Amazon and other video streaming platforms, thanks to faster internet speed and deeper access of the internet worldwide. Also, the fact that one pays only for the content one wants to stream plus the convenience of it were major selling points for the success of the streaming services. Netflix is the leader in this service segment controlling over 70% of the global streaming video on demand market.

Disney, one of the largest movie studios in the world is set to enter the video streaming business by November 2019. Though a little late to the business, the highly anticipated subscription video on demand (SVOD) service of Disney is set to hit the market on 12th November 2019 in the US. Streaming service sites are not a platform which can be conceptualized overnight. They require massive infrastructure investment, both in terms of the interface and the programs to say the least. But in the case of Disney, taking control of an entity like Hulu, which already has all functions in place, has allowed the company to cut a lot on the setup. The service of Disney+ will launch with an initial content which will include 7,500 episodes of new as well as old TV shows and 500 movies, as per Disney. That would represent ~16% of Netflix’s US TV episodes and ~12.5% of Netflix’s movie library. So far, Netflix has been the undoubted king in the SVOD market with about 150 million memberships in nearly 200 countries. But both general opinion and market movement suggest that with the entry of Disney+ there will be some serious competition. When Disney announced the forthcoming service of Disney+, the company’s stock jumped by 12% indicating a positive expectation, whereas on the other hand, Netflix took a hit of 5% during the same time. The initial reveal on plans show Disney’s aggressive pricing for its entry, announcing the Disney+ service for just $6.99 a month (or $69.99 a year). The company also announced that it will be offering its services as a bundle comprising of Disney+, Hulu (which Disney took over in May 2019) and ESPN+ (which is also controlled by Disney) for only $12.99. At $12.99 this bundle from Disney+ is priced only $4 more than you pay for Netflix’s basic package, and more so $3 less than Netflix’s premium package.

Major studios, including the likes of Disney, are making moves to taking control of their own content for their own platforms. This has not been the best news for Netflix, who has also been building its own content, spent billions in recent years and delivering genuinely good original content well accepted by viewers. However, coincidentally many of the original shows of Netflix which were created in-house are based on Marvel characters. These Marvel characters universe is owned by Disney, and with Disney launching its own version of the streaming platform, these very successful shows which had put Netflix on the map have now officially been cancelled. Content is the need of the hour for these video streaming companies, and the companies are well aware of that. Netflix spent $12 billion developing original content in 2018, releasing ~88% more original program in 2018 than what it did in 2017. This strategy to create original content has paid off with some of its shows becoming subscriber magnets – such as Strangers Things and Black Mirror. The trouble for many of the video streaming companies against a company like Disney is that they are far behind in terms of content. The company (Disney) owns some of the most valuable content, which includes Marvel, Pixar Animations, Star Wars, ESPN, National Geographic and not to mention all the classic characters like Mickey Mouse and Donald Duck. In the past 5 years, Disney has captured majority of the market share with the movies (content) it has produced.

But despite all the advantages for Disney, the argument that Disney+ will disrupt the video streaming industry displacing the leader Netflix is bit of exaggeration, as at its core Disney+ is just another platform using the same technology with similar economics. Rather, Disney+ and Netflix along with Amazon Prime, Apple TV (yet to be launched) and other streaming services will continue to coexist and battle in terms of content for the years to come. There will be winners and losers no doubt but arguing that Disney+ will re-define the video streaming industry is a statement too bold and early to make for now. With the industry growing consistently, it will attract more new streaming platforms with more original content, with more personalization, niche content and also more of data-driven algorithms.

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