Netflix and Disney+ don’t have the same business model
When we read about “THE STREAMING WARS” we are inclined to believe, that Netflix, PrimeVideo, Disney+, AppleTV+ and HBOmax (just to name a few) have the same business model. They have not. They compete in the same market, but their business model is completely different.
Where Disney+ and HBOmax use content their respective owners already own, Netflix, PrimeVideo and AppleTV+ have two options: Either “rent” content from third-parties and pay per time period, per view or per some other opaque metric, or create their own content from scratch.
This puts these services in completely different positions:
Disney doesn’t care if you watch Star Wars, Avengers or The Lion King once per year or three times a week and also doesn’t care if you watch something else on their service instead. Every legacy content (from before their streaming days) has already paid for itself in its initial run or has been depreciated a long time ago. Either way: it costs Disney close to nothing (only infrastracture and maintenance) to let you watch their content.
Sure Disney+ original content needs to be produced but the costs only need to be offset with the monthly fees of their subscriber. No other relevant expense exists for Disney.
Netflix on the other hand needs to pay for third-party content and needs to produce their own content at the same time. They are aggressively pushing Netflix Originals because it costs them much less per view, though I’d argue a lot more people are happy watching The Little Mermaid or Frozen for the umpteenth time than there are superfans craving their next chance to rewatch Bird Box.
And this gets worse if you consider the third-party content on Netflix may attract even more eyes as well: It was rumored for a long time, that Netflix’s most watched show was Friends, which Netflix needed to pay for and didn’t own, while the original owner - Warner Bros. - had ample time to offset or depreciate the initial costs in its life-time since 1994!
The deck is stacked against Netflix: since Disney had a lot more time to create beloved classics and has a lot more cash at hand to buy the rights to other people’s timeless classics, their streaming service has to offer a lot more for a lot less.
In time Netflix may land a few hits and create a movie or tv show comparable to Disney’s (which also owns a lot of tv rights), but Disney has proven the ability to create even more classics as time goes on. And here comes the biggest problem in Netflix’s business model: Disney makes back a huge part of their initial investment in cinemas around the globe. Disney+ is only another way to cut out the middle man like cable and tv networks on secondary distribution. While Netflix is the primary distribution for its Originals.
Additionally I have the feeling that a lot of Netflix Originals are a “one and done” affair comparable to YouTube: you watch it once and it gets one meme cycle and then you wait for the next season. This doesn’t mean I don’t like Stranger Things, The Witcher or Casa de Papel. But I don’t come back to them time and time again. And this coming back is crucial for Netflix: It costs a considerable amount of money to create new content, but it costs nothing per view to rewatch content.
When we read about “THE STREAMING WARS”, it seems like some high stakes contest between equals, where small differences like the best new content or the best app or the highest quality could change the outcome. Though I believe the outcome is nearly premediated: content is king and the small differences can’t change that.
As a closing thought: Though PrimeVideo and AppleTV+ have the same business model as Netflix, both can be subsidized by their gigantic parent companies with deep pockets. While Netflix has a lot of debt.
Netflix reinvented itself at least twice by now. And I believe it will need to reinvent itself once more.