The Streaming Wars

Before I get started…this Hot Wings episode with Shaq is hysterical. Ellen and I were laughing out loud.

I think Shaq is a legend. No matter how or where I see him speak I marvel at his intelligence, his humor, his integrity and his joy for life.


I am long Disney and have talked about that here on the blog. Also back here.

Yesterday they reported earnings and the stock is down today because people are unhappy with their ‘numbers’. As I get older, I lose more and more interest in following stocks so closely that I worry about what people say about quarterly numbers. Disney is in the attention business and they do a great job of locking babies and adults in. So much so they are in my 8 to 80 list of stocks.

My takeaway from the numbers after digesting a lot of opinions is the war with Netflix is real. It will be bloody for Disney and Netflix as they battle for attention. This year it has been extra bloody for Netflix as Disney finally announced ‘plus’ (I do not own Netflix).

Don’t take my word for the details and the strategy battles ahead…have a read of Matthew Ball’s piece on the sunject for Redef. For me, the particulars as it relates to Disney and Netflix, this thought stood out:

The goal of Disney+ is to be the new core, or anchor, for Disney. And it will drive the overall health of everything Disney does, whether it’s sold through Disney+ or outside it through traditional third-party channels. Disney+ will achieve this by enabling The Walt Disney Company (for the first time ever) to know exactly who interacts with its content, how frequently and in what categories, and through which characters – and to know exactly what these subscribers buy, at which (targeted) prices and when. This should then allow Disney to increase consumption of its content, drive additional cross-upsell of its other products and experiences, disintermediate its traditional channel partners (e.g. travel agencies, movie ticket sellers, retailers) and improve margins across the entirety of its non-Pay-TV business. It can’t do this if it’s disintermediated by a third party in video. And as a result, the service is about maximizing Disney ARPU, not Disney+ ARPU or total video revenue. Generating $70 or $100 a year from Disney+ is irrelevant when you can use the service to drive a $5,000 Disney cruise vacation (and these customers will assuredly get Disney+ for free anyhow as it has no marginal cost).

To view Disney+ as a Netflix killer is thus to misidentify its business model, ambitions and role. The real casualties from Disney+ are likely Netflix’s competitors (new, such as Apple and WarnerMedia, and old, such as Starz and Showtime), which have undoubtedly been forced to lower their launch prices and/or long-term pricing as a result of Disney+’s $6.99 monthly (and $5.8 annualized) subscription fee.