If these are busy days for the streaming industry, imagine for Netflix, who, at least for now, leads the sector. Less than a week from today, Disney‘s own streaming platform arrives officially in the US and a few other markets, right behind Apple TV+ launch, which took place on November 1st.
But before the official debut of the media giant in streaming lands, what should we expect from the new platform? LABS gathered some context regarding this market to shed a light on what is at stake with Disney+ release. Take a look:
Losing a home league
When Reed Hastings and Marc Randolph, back in 1997, decided to found a business with DVD sales and rental by mail–they couldn’t imagine, not even in their wildest dreams, what Netflix would become years later. With almost 160 million subscribers worldwide in nearly 200 countries, the Los Gatos company grew to be the undisputed king of streaming and led the era of binge-watching with its huge successes and original productions.
¿Que tú crees si juntos nos quedamos viendo Netflix? “How about we watch Netflix together?”, says the lyrics of a reggaeton song from Catalan singer Rosalía and Colombian hitmaker J Balvin. Once a player in solo land, the streaming giant completely shifted the way people discover, watch and interact with content and became a loved mark all over the world, with offices set in the Netherlands, Brazil, India, Japan, and South Korea, besides the US; and a long list of mega-hits like House of Cards and Stranger Things.
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But what it looked like a skyrocketing success is about to change. With Apple TV+, HBO Max, Peacock and mostly Disney+ stepping into the scene, Netflix is now facing the biggest plot twist of all of its seasons.
Money talks (does it so?)
$12.43 billion. That’s what Netflix reported in debt as of September 30, up from $10.36 billion at the end of 2018. This is hardly surprising, as the company came up with a big effort to produce new content, ensure the rights for additional shows, and diversify through almost 200 markets. As if that weren’t enough, the Los Gatos streaming giant told investors that intended to raise more debt. According to Variety, for the full year of 2019, Netflix expects $3.5 billion of negative free cash flow, in comparison with $3.0 billion in 2018.
What is more: even spending piles of money, the company does not ensure a safe spot. Praised and loved by an entire generation, 90’s sitcom show Friends, which was once part of Netflix’s catalog, was stolen by HBOMax in a $ 425 million deal; while mockumentary sitcom starring Steve Carrel The Office became property of NBCUniversal’s Peacock for $ 500 million.
Other back and forth transactions also included Netflix’s acquisition of the popular comedy Seinfeld, while the WarnerMedia service to be launched, HBOMax, will be the new streaming home of geek show The Big Bang Theory. Parks and Recreation got its rights also secured by Peacock.
However, even with serious hurdles to tackle, Netflix surprised even the most skeptical investors with quite positive results in Q3. Beating Wall Street estimates of $1.05 and their own forecast of $1.04, the company actually posted earnings of $1.47 per share, reaching $665 million. In this period of 2018, the same figure was $0.89 per share.
By largely exceeding market expectations regarding profit, Netflix saw its shares got back on the rise with an increase of as much as 10%, reaching $317 in after-hours trading on October 16, when the Q3 earnings report was released.
In our view, the likely outcome from the launch of these new [streaming] services will be to accelerate the shift from linear TV to on-demand consumption of entertainment.Netflix’s statement in the company’s official Q3 report
Whether this third-quarter was only a brief truce or rather, a real sign that Netflix will remain the streaming king, is something that we will have to wait and see, since this was the last quarter previous to the launch of Apple TV+ and upcoming services HBO Max, Peacock, and Disney+. And while these others don’t rely only on streaming services as their core business model–having alternative assets to strengthen their position in the competition–for Netflix, it’s exactly the opposite.
Coming soon: Netflix biggest challenge
$59.434 billion in revenue during 2018, 96 years since its foundation and recent mega-hits like Toy Story 4 and The Lion King. If there’s a company that knows how to stay on top generation after generation – this is The Walt Disney Company.
From a former Disney Brothers Cartoon Studio, founded in 1923 by Walt and Roy O. Disney, to a multinational mass media and entertainment empire, the company managed to gather a series of different businesses under the same roof. Television, publishing, films, music, video games, entertainment parks, broadcasting, radio, web portals, and licensing for a wide range of different products became an endless source of revenue and creativity of Walt Disney Company’s powerhouse. So it comes as no surprise that now, the media giant will step onto the battlefield of the streaming wars. And more than that: Disney seems to have the right weapons to win.
Offering most of the productions of studios within the Disney group—which currently includes films from the recently acquired Fox, documentaries from ESPN, and TV series from ABC– Disney+ platform will launch in the US next week, November 12, costing $6.99 per month (or $69.99 for the annual subscription). From this day on, the new streaming service becomes the exclusive home for productions from Pixar, Marvel, Star Wars, National Geographic, and Disney itself.
“The incredible popularity of Disney’s brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings.,” CEO Bob Iger said in the company’s third quarter earnings report.
Great hits like Captain Marvel, Avengers: Endgame, Toy Story 4, The Lion King, and Star Wars: The Rise of Skywalker, to name a few, will also become part of Disney+ catalog, as well as upcoming movies of the studio.
Consumers will, as well, be able to choose another subscription plan, also starting from November 12: bundling Disney’s three streaming services together, Disney+, Hulu, and ESPN+ will be available for a highly competitive price of $12.99 a month. Recently, a Netflix basic monthly subscription in the US went from $7.99 to $8.99, while the most popular plan, which used to cost $10.99 for two HD streams, now costs $12.99.
On top of it, Disney announced last month another weapon to play against Netflix, by banning all the ads from the Los Gatos company of its TV channels. At first, Disney had sent a statement for its employees banning ads from all Disney+ competitors on the company’s channels, but it stepped back from the decision and reaffirmed the partnership with other brands, except for Netflix.
And all Disney’s efforts to steal the crown from Netflix in the streaming market are not exclusive to the US borders: Disney+ is already set to launch in other markets such as Canada and the Netherlands also on November 12, followed by Australia and New Zealand precisely one week later. And right after, as early as 2020, the streaming service will also arrive in Latin America’s 1st economy: Brazil
It’s streaming time for Latin America
Despite being present in nearly 200 countries, Netflix only has offices in another 12 locations beyond the US – one of them? Brazil. In June, Amazon announced that it would open its first streaming office outside the US in Rio de Janeiro, in order to support all of its South American streaming operations. Apple TV+ arrived in Brazil and Mexico on November 1st costing a competitive price of BRL 9.90 and MXN $ 69, respectively. Amazon Prime, a combo subscription of music, books, games, series, streaming movies and free shipping for e-commerce, came to Brazil in September also costing only BRL 9.90. And Disney+ is set to arrive in Brazil in 2020. If Latin America once stayed out of the streaming radar, that’s certainly no longer the case.
And it is not by chance: streaming and ride-hailing applications have been gaining ground in Latin America’s first economy. According to a study conducted by the financial management app Guiabolso, which presented information on how the adoption of these services is already filling a good piece of Brazilians’ budget; those who use the four categories of services analyzed–food delivery and ride-hailing apps, and music and films streaming services–may be spending, on average, 22% of their monthly budget on it.
A growing behavior among Brazilians, streaming services have been stealing the show and becoming each time more usual for these consumers. A survey held by the global fintech EBANX with 3,029 interviews applied from August to September of this year found out that Netflix is used by 68% of consumers of cross-border websites. Regarding other streaming services, both video and audio, 29% of respondents say they use Spotify, 13% use Deezer, 8% HBO Go and 8% Amazon Prime.
Beyond figures, the sector has been filling a growing stake not only on Brazilians’ pockets, but also on their minds – on an ever-greater scale. The Exame Nacional do Ensino Médio – shortened as Enem – is a standardized Brazilian national exam that, every year, evaluates high school students in the country. In 2019, unlike in other years when the subject was wider, Enem’s essay’s theme asked students to elaborate on “The democratization of cinema’s access”.
The subject, for some educators, could be approached regarding the audiovisual productions not only when it comes to movie theaters, but also with the entry of platforms such as Netflix, that has been increasing access of such productions to Brazilians due to the growing levels of smartphone adoption and internet usage in the country, in addition to affordable subscription prices and, unlike movie theaters, no need for displacement. ENEM is the most important exam of its kind in the country, with more than 8.6 million registered candidates in 2016 – and having streaming platforms taking part in the conversation of such a huge scale, show, at least, how the sector is becoming pivotal in the country.
What’s next on the streaming wars
Even though Netflix is the current winner, with a stake of 68% of consumers of cross-border websites in Brazil according to EBANX’s survey, some other players are willing to change this game anytime soon. One of them is definitely Disney+.
In an informal poll held in a Brazilian Twitter account, with more than 10 thousand votes, a user asks his audience which streaming service they would choose (assuming that all of them were already available) if they had to opt for only one – and the result is quite surprising: 45% of the respondents chose Disney+, over 28% that opt for Netflix.
As for the choice’s criteria, another interesting insight appears on this Twitter’s poll: the importance of a high-quality selection of content for someone who’s looking for a streaming service. 77% of respondents answered that the first thing to take into account when subscribing for a streaming platform is not new launches and not even price – but rather, the catalog available.
Although this is not a proper survey, it certainly can provide some insights into how the Brazilian market might react with the upcoming players entering the battle. Meaning: if Netflix once reigned supreme in the game – that’s certainly no longer the case.
The integration of the businesses we acquired from 21st Century Fox only increases our confidence in our ability to leverage decades of iconic storytelling and the powerful creative engines across the entire company to deliver an extraordinary value proposition to consumers.Disney’s CEO Bob Iger
How the industry will actually shape up with the entry of these new services, it remains to be seen – but Disney is coming with a well-planned strategy, powered by years of experience in telling great stories, spreading these content in a wide range of channels and, of course, being very price-competitive. If there is anything to be sure about it, it’s that the streaming wars still has a long way ahead until the season finale.