The default line of thought every time we hear about the upcoming launches of Disney’s streaming service Disney+ and Apple’s much awaited Apple TV+ service is quite binary—this must surely worry Netflix, giving them sleepless nights? Surely, the undisputed global leader in video streaming must be shaking with fear that Disney and Apple will take massive bites into its pie? Chances are, Netflix is surely looking over their shoulder, expecting Disney+ and Apple TV+ to show up in the rear-view mirrors at some point. But that isn’t going to slow down the leader.
If the past few months are anything to go by, Netflix is on a strong upward trajectory. The streaming service added 9.6 million users in the first three months of this year, which is more than the 8.9 million estimates. This means that Netflix now has 148 million subscribers globally. Revenue also higher than $4.5 billion, a 22 percent increase. There was considerable trepidation that the subscription price hike, which became applicable in US, Mexico, Brazil and in some countries in Europe in January this year, would slow down Netflix. Users won’t be willing to pay more for Netflix. They will all cancel their subscriptions. There would be anarchy. Netflix would come crashing down. And so on.
None of that has happened. In fact, the price increase is to factor in the millions that Netflix is spending on original content, also known as Netflix Originals. Netflix has reiterated this consistently since last year, that they intend to invest heavily in creating original content, over and above the rights they acquire from other studios. In fact, the streaming service intends to spend as much as $15 billion this year alone on exclusive content, carrying on years of consistent spending to beef up its Originals properties. Some of that cost now has to be passed on to customers.
Whatever the case may be with Disney or even the rivals such as Amazon and HBO in terms of the money they may be able to spend, no one really comes close to matching the sheer diversity and range of Netflix and the content it offers to consumers under one roof.
It is no surprise that during the recent earnings call, Netflix CEO Reed Hastings mentioned he was “thrilled” that Disney and Apple were joining in the fray, but remains convinced they aren’t immediate threats to Netflix’s throne. At least in the short term. “As cord-cutting accelerates, it frees up wallet to spend on a wider array of SVOD services. In turn, while everyone wants to talk about Disney+ as a Netflix killer, Disney+ is actually helping Netflix and all other streaming services by freeing up wallet share for SVOD,” said BTIG Research analyst Rich Greenfield in a note to investors last week.
Wall Street believes that the arrival of Disney+ and Apple TV+ will actually not hurt Netflix, but instead could see consumers cut spending on cable or satellite TV and instead sign up for on-demand services. Disney is making it quite interesting as far as the pricing goes. Disney+ will be priced at $6.99, which significantly undercuts the pricing that Netflix and the likes of Hulu as well as HBO Now have in the US. We still don’t know what the Apple TV+ service will be priced at.
But it will be a completely different challenge in India, as and when Disney+ launches here to compete with Netflix. In India, Netflix subscription prices start at Rs 500 per month for the basic plan with standard definition (SD) streaming. There are two more plans priced at Rs 650 peer month (HD streaming on two devices) and Rs 850 per month (Ultra HD streaming on four devices) to choose from. Netflix has to contend with Amazon Video, Hotstar, Sony Liv, Voot and Zee5 to name a few. Amazon Video is a part of the larger prime subscription priced at Rs 999 per year, which offers other benefits such as faster shipping and Amazon Music streaming as well. Hotstar offers a VIP subscription plan which costs Rs 365 per year for Live Sports and Indian language content, and a Hotstar Premium subscription plan priced at Rs 199 per month or Rs 999 per year for viewing everything on the platform. Sony Liv charges Rs 499 per year for the premium pack, while Zee5 will cost Rs 999 per year for the All Access Pack. Incidentally, Hotstar will have the Disney+ content on its platform, and is expected to not charge for a separate subscription for the same.
However, some tough questions will be posed, and will have to be answered by Netflix. The primary of those would be the content apart from the Netflix Originals. The recent example of Netflix having to shell out $100 million to pay Warner Bros. for a one-year extension to stream “Friends” in the U.S. and Canada underlines that content from other studios will probably become a bit more expensive in the coming days with more streaming services available. This will be an interesting space to watch, at least for the next few months—at least as interesting as the content they package, if not more.
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