At present time of writing this, Netflix has monopoly power over the online streaming services due to their subscriber ratings and amount of places in the world they presently occupy. Netflix is in over 200 nations and has had over 100 million online streamers since launching. The market is incredibly imperfect as Disney failed to predict the growth of Netflix when they signed a deal to allow them to have their movies. Subsequent to understanding their fatal error, Bob Iger, the CEO of Disney decided not to renew their contract. This is why I am predicting that the Netflix monopoly could be broken by 2019, the year the contract ends!

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The debate of a dog fight between Netflix and Disney is already happening. That is not the main point people should be focusing on as it is inevitable. The thing we must look closely into is the size of the fight and if there is room for two winners. For some analysts it may be a ‘zero sum game’ but for others the multi-billion pound online streaming pie can be shared. Can Netflix stay reigning champions of online streaming or can Disney ease past any attempts of Netflix to make barrier to entry difficult?

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Remember (before reading on)

 

When reading my articles, always have your own opinion when reading it and do your own research as I can often be wrong or shift my perspective on the issue at hand in a later date.

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Reed Hastings, the CEO of Netflix, knows that he must protect and expand before it’s too late. On the 14th of December, 2017 it was announced that Disney had agreed to buy most of 21st Century Fox for 54.4 billion dollars. This meant that Disney would have over 40 percent of the movies and TV show rights in America and Europe. After seeing this statistic, many would think that the Disney could fly into the market with little problems. Nonetheless, Apple seemed to know that they must get involved now if they are looking to start ahead in the online streaming race and soon after announced their interest in Netflix. Apple would have no problem acquiring Netflix shares either with all of them being public.

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On the day of Disney buying Fox, Netflix share price fell by around 15 dollars from the previous month. Panic was the name of the game. As investors started to see the power of 21st Century Fox, who hold the rights to classics such as Xmen and Avatar, joining with Disney who have more than 600 movies, that accumulated to over 74 billion dollars of revenue, stocks were sold at a large decrease to normal share prices. On the contrary, only months later, Netflix share prices have soared through the air due to interest from Apple.

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Indeed, the share price of Netflix at the moment could easily take a hit like never before if Apple decide not to buy it. Though this is unlikely to be publicly announced, Netflix would need help fast. Hastings and Netflix have already decided to spend 8 billion dollars in 2018, which is two billion more than the previous year. The money would go into 'Netflix Originals', which have been a great success so far. In 2019, Netflix will lose over half of their movies currently on the site. As Netflix has only been alive since 1997, and only released their first series in 2013, they don't have the luxury of classics like Disney, who produced their first movie, Snow White and the Seven Dwarfs in 1937. Is a Star Wars series more powerful than Stranger Things?

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No one who owns Disney can be truly sure either, which is reflected in their recent fluctuating share price as well. The biggest questions are yet to be announced and the gun to start the full race has only gone off for Netflix.

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So what does Netflix have going for them....?

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1) Loyalty

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Through the past 5 years, people have become addicted and entertained by the original TV series by Netflix. These vast and entertaining options have almost doubled the subscriber count by adding in the United States. As everyone knows who has ever watched a gripping Netflix Original, such as the Crown or Suits, you can't stop watching. This is essentially loyalty as if there are more seasons, the members who watch will keep their subscriptions.

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2) Subscriptions

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Netflix finished 2017 with over 100 million subscribers and are projected to take in many more in 2018. The more people who have signed on to Netflix, the more unlikely people are to know how to switch or be bothered to leave and stop paying. This is the reason, once you have normally accumulated a large audience on a technological site, many people stay forever, which takes a huge amount of customers away from Disney. This may be wrong though as with an up and coming young generation who are the majority of Netflix, it may be simple for them to cancel their membership and move to Disney's new streaming service.   

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3) Practise in modern day TV shows

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TV shows are the thing at the moment! However, it is all about content, which in my opinion, Netflix has the advantage as Disney haven't even got into full gear about making their originals yet. At the point when Disney are making the same amount of TV shows as Netflix which will happen, it will come down to addiction, price of making the shows and subscription price as well as if classics even matter. At the moment though, Netflix have hugely popular box office sets that would seem nearly impossible for someone to take you away from. This large array of originals allows them to collect 'Big Data' on what is successful with the audience and give them that edge on what to produce to stay ahead of Disney when they go full steam ahead.

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4) A chance to be dominant on every Apple device with Apple TV

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This is the biggest IF of all! The power Netflix could gain would be indescribable if Apple bought Netflix. The two could combine their huge list of Apple TV and Netflix content making Disney hard to disrupt innovation. Moreover, distribution power is vital to success. The synergy created between Apple and Netflix would mean anytime you bought an Apple device, it would be easy to have Netflix and as difficult as possible to get any other streaming service.

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5) Possible backing and extra capital from the biggest phone company in the world with expertise

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Apple has more money at hand, currently, than the United States Treasury. This could be invested into Netflix so that they can diversify faster and more efficiently than Disney as well as allow them to expand at rates that Disney may just not be able to cope with. In addition, Apple has technology geniuses and are announcing their new offices in 2020, which promise 50,000 jobs. This super power and expertise may help Netflix stay ahead of this huge and approaching competitor.

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The advantages for Disney...

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1) Loyal Disney subscribers as well as Clssics that are expanding

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Star Wars seems to be attractive to all ages as well as a number of other classics still expanding today, such as the Last Jedi, which is number one in the box office. Would anyone give those up? Disney ABC channel reaches and estimated 100% of households with a television.  

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2) Experience like no one else

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Disney has been going since 1923, so there is no better evidence that they know how to stay kings of a market when they get involved. Many say that "experience is the best teacher", but "all good things must come to an end". If I were to guess how Disney would adjust to this market, I would say "just fine" as it has been proven over the years but this would be an unbelievable test of strength.

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3) More capital than Netflix (without Apple)

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If Apple does not purchase Netflix, Disney have a huge advantage in terms of amount of capital they could spend each year on producing. Whether this be a good investment is another debate but facts are facts. This could, if Disney was willing, overpower Netflix in my opinion.

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There are Too Many Unanswered Questions!

 

Can both be sustainable when they have to set their subscription prices?

 

Which online streaming site will be cheaper?

 

Will Amazon get into the market and what does that mean?

 

How can Apple block or disturb other streaming sites on their devices?

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How price inelastic are subscribers from Disney and Netflix?

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Is it even likely Apple buy Netflix and when will it be too late?

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These are only the base layers of questions, which need to be answered to know the fate of these large corporations and the online streaming industry.

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If I were anyone looking to invest in shares of either of them, I would place my vote currently with Disney as Apple has not bought Netflix yet. Saying this, if Apple do purchase Netflix, both could be good acquisitions and the market could be shared...

 

However, I could be underestimating the power of Fox and Disney together. It is impossible to say though without each specific question being answered or competitor truly being established yet.

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No matter the answers to the additional questions or if Apple buys Netflix, there will be a dogfight between Netflix and Disney! Who knows how big it will truly be and how long it will take for one to take the majority of the market but it's going to happen!

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I would love to hear your opinion and what you thought of the article. 

Comment Below