Is Disney+ growth sustainable? In short, yes – if it continues to evolve. Unlike Netflix and other streaming video on demand (SVOD) services, it’s not dependent on the creation of expensive original content or the acquisition of local foreign-language production companies to fill its digital content shelves. It’s got the ad infrastructure, copious first party data and addressable market to make its forthcoming ad tier a barn-storming success right out of the gate. And in a world where subscribers will churn for better deals and bigger releases, it can bundle its offerings to add the extra value needed to keep them loyal.

The third largest streamer in 3 years 

Disney+ launched as late as 2019, yet it already has 151.1M subscribers to Netflix’s 220M. The reasons for its success are well documented – it’s comparatively new, so has benefitted from the exponential phase of subscriber acquisition. It has the power of its subsidiaries (Marvel, Lucasfilm, National Geographic, A&E, 20th Century Fox, ESPN, Hulu, and Pixar) behind it. It has prioritized international expansion to offset slowing subscriber numbers at home and has done so strategically. As well as localizing global hits for new markets (like Netflix) it acquired local streaming rights for key categories (sport) in key markets like India, with its acquisition of 21 Century Fox’s HotStar. The move means it has 58.4million subscribers in India to Netflix’s 5 million. 

Source: Insider Intelligence

Cheaper subscriptions and the introduction AVOD

Disney+ was able to launch with a cheaper subscription price of $7.99 because it already had a large back catalog of content with no licensing fees. Now it’s won subscribers, it’s increasing the price of its subscription to $10.00 and introducing an ad tier for US customers in December 2022, followed by global rollout in 2023. Netflix has brought forward the rollout of its ad tier to November 2022 to try to get ahead; a move that betrays its concerns around Disney+ as a competitor. Not only does Disney have strong first-party data (across its entire portfolio – cruises, parks, entertainment) and an addressable audience for advertisers, it has been investing in ad tech for years: “it has Hulu in its arsenal, the only US streamer that has built its own ad server”(The Drum).

It’s benefitted from witnessing the pitfalls of Netflix’s strategy

In Q2, 2022, Netflix announced subscriber losses to the tune of almost 1 million subscribers (amounting to a $50billion drop in its market cap), while Disney+ gained 14.2million new subscribers in Q3. Just as Netflix learned all those years ago — when it withdrew from the physical rental race with Blockbuster, pivoted to streaming and made its fortune — sometimes being incumbent has its disadvantages. Disney+ and the other streamers have identified flaws in Netflix’s existing model and are being more creative with their offerings; not only with the introduction of ad tiers, but by releasing content weekly to reduce subscriber churn. The rise of FAST platforms like Pluto TV has also arisen mostly in response to viewers' need for pricing optionality, but also in part as a response to viewer decision fatigue precipitated by the streamers.

Less of a reliance on costly original content 

Netflix started out by capitalizing on the new category it created by getting licensing deals cheaply for content that was languishing in back catalogs (The Office, Friends etc.) What was a coup back then has become a cross to bear now, as providers continue to pull their licensing deals (Criminal Minds, Netflix’s most streamed show of 2021 was pulled from Netflix to Paramount Plus) realizing the value of their own content. Disney+ doesn’t have this problem. It owns the content it launched with and while its service doesn’t currently offer the whole of the Disney+ entertainment empire, it has access to it. While the future of Netflix is reliant on its (expensive) original content or the acquisition of local production houses, Disney+ has the luxury of producing it as a marketing exercise, funded by the bulging coffers of its many-stringed enterprise (sports, news, local). It can create originals safe in the knowledge it can pull in viewers off the strength of its existing catalog and monetize them strategically through their forthcoming ad tiers, bolstered by lots of first-party data that is attractive to advertisers. 

The Mandalorian on Disney+

Disney+ can add value in other ways

The increasing number of SVOD platforms has caused “acceleration but furthering fragmentation” in the space, so that, “ it’s now far more challenging for content owners to secure a slice of viewers’ engagement — and wallets" (Variety). In this climate, Disney+ is in the strong position of being able to offer more value by bundling together its services to offer subscribers more value and incentivize their loyalty. Go to Disneyland! While this is a key differentiator from Netflix, it competes with the likes of Apple and Amazon in the space. 

Live content could be a key differentiator for  Disney+ 

Disney+ ran a successful livestream trial of the 94th Oscar nominations with simultaneous streams broadcast on Hulu, ABC News Live and the Academy Awards’ various owned platforms (Fierce Video). Although the Disney portfolio already includes live content, via ESPN and Hulu, if Disney+ can add live to its services, it opens up opportunities for live sports in the US and in Latin America where it’s aggressively buying sports rights (The Drum). In the fragmented streaming space, differentiators like this one are important. 

Disney+ is in a strong position, however there’s no denying that competition in the SVOD space is tough. FAST is on the rise and subscribers are looking for value and will defect to find it. In this climate, change is the only constant and those who innovate ruthlessly, like Netflix did all those years ago, will be the ones who win. 

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