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The streaming wars are finally beginning, but it’s more of a polite quarrel than an all-out war

The streaming wars are finally beginning, but it’s more of a polite quarrel than an all-out war


Wall Street has renewed confidence in Netflix

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Ever since companies like Disney, AT&T, and Comcast announced that they were developing streaming platforms, the narrative has largely been: “War is upon us!” In this case, “us” refers to the streaming companies that are fighting for people’s attention and time. But in a broader sense, “us” also refers to the billions of people who will have to choose where to spend their hard-earned cash every month.

“Streaming wars” are fun to think about. The drama writes itself. Right now, it feels like everyone is trying to take on Netflix — something that investors and analysts were worried about heading into the first earnings season following the launch of Disney Plus and Apple TV Plus. Some were anticipating a drop in Netflix stock following Disney’s first quarter report. That didn’t happen.

A number of Wall Street analysts issued notes about the biggest showdown in the new streaming era thus far: Netflix versus Disney Plus. Disney announced on Tuesday that its new service has surpassed 28 million subscribers since it launched three months ago. It’s an important number, nearly surpassing Hulu’s entire subscriber base and building in three months what took Netflix five years. (Note: Apple TV Plus isn’t even a part of the conversation, though CEO Tim Cook said he was pleased with subscriber results. Cook didn’t tell investors or reporters what “pleased” amounts to numerically.)

Right now, it’s more of a polite quarrel than an all-out war

Still, Netflix’s stock went up, and analysts let up on some of the doubt they had. This can change in the coming year; it’s still early days. Disney Plus just launched, and services like HBO Max and Peacock haven’t launched yet. HBO Max and Peacock are also owned by major telecom companies — AT&T and Comcast, respectively — that can help them widen their reach. (Netflix is currently partnered with T-Mobile.) There’s every reason to believe that the streaming wars will heat up in 2021 and beyond. But right now, it’s more of a polite quarrel than an all-out war.

Picture the scene like something out of a movie: Disney, the new kid from out of town, arrives at prom and, suddenly, all eyes are on them. Until people remember the Queen Bee standing off to the side, and all eyes slowly turn back to Netflix. The whispers start, and everyone’s expecting a bloody showdown. Except when Netflix and Disney meet in the middle of the gymnasium, there are no blows or devastating insults. There’s just a firm handshake, maybe even a hardy laugh.

“Consumers want their Netflix ... and now Disney+,” Raymond James analyst Justin Patterson said in a note. “We continue to see Netflix and Disney co-existing.”

Patterson continued that part of Disney Plus’ success is “attributable to Netflix’s role as a pioneer, which helped drive video hardware and software innovation.” That includes building an infrastructure designed to encourage “consumer behavior away from linear” television programming. Bank of America analyst Nat Schindler added to the conversation, writing in a note picked up by Bloomberg that Disney Plus’ engagement still isn’t as strong as Netflix’s, “reinforcing our view that Disney+ is not a substitute.” Netflix is still Queen Bee, paving the way for Disney Plus to shine in the spotlight.

“We continue to see Netflix and Disney co-existing.”

“They are two very different services,” Patterson reiterated.

If these declarations sound at all familiar, it’s because they are: Disney CEO Bob Iger and Netflix CEO Reed Hastings have said for years that they don’t see each other as competition. They’re not entirely right; Disney Plus and Netflix are competing for our credit card numbers and Sunday evenings. Disney also pulled its entire catalog of films and TV shows from Netflix in order to compete against the streamer.

Not to mention Hastings has changed his tune, finally addressing that Netflix has competition — the biggest currently being Disney Plus. Hastings had to explain to investors why Netflix only secured an additional 420,000 subscribers in its last quarter instead of the targeted 600,000. The CEO argued that low subscriber growth could be the result of price hikes, but he didn’t shy away from acknowledging that Disney Plus (and, to a lesser extent, Apple TV Plus) has been catching people’s attention.

Netflix used to have an entire airplane row to itself, and now, someone is sitting directly next to them, hogging the armrest and clearing its throat every few minutes. Disney Plus is a discomfort Netflix can’t ignore any longer and will get used to over time. Disney is more than happy: 28 million subscribers in three months is an impressive feat, one that Iger acknowledged exceeded even his greatest expectations. Additionally, its other streaming divisions (Hulu and ESPN Plus) saw incredible subscriber additions.

Disney Plus is a discomfort Netflix can’t ignore any longer and will get used to over time

Disney doesn’t see Netflix as major competition, either. There are two reasons for this: 1) Disney is Disney and doesn’t really see anyone as competition, but more accurately, 2) Iger believes that while Netflix is still figuring out its brand, Disney knows who it is.

“There’s obviously more competition coming into the space, but there isn’t any competition that is like ours,” Iger told investors.

Everything boils down to us, the people with the credit cards. Right now. Netflix is a staple streaming service, and Disney Plus is priced just effectively enough and is just tantalizing enough with its franchises. Everything will heat up once new major entrants like HBO Max and Peacock come into play and can compete with Netflix and Disney — not just in originals, but with libraries that people actually want.

Eventually, we’ll have to start to choose what we prefer: keeping up with the latest thing everyone’s talking about or having a large roster of classics. That’s when the wars will really begin. Those that can do both will win. WarnerMedia, for example, is launching an entire film studio dedicated to making movies exclusively for HBO Max that gets people on the service, but it’s also going to offer Friends. Even then, customers could rotate month-to-month if they wanted because signing up and canceling is simpler than ever.

“It’s usually compelling content that gets you there, but it’s the breadth of the library that keeps you there,” Mark McCaffrey, a senior consultant and TMT leader at PwC, told The Verge. “It all depends on what stage you’re in. It should get to the point where I can keep you there not only because I have good content to bring you in, but pretty deep content to keep you watching. The consumer has no loyalty to anyone, and the cost of switching is practically nothing.”

It’s not a war just yet, but it is a race. Things will change in the coming years: the race will go global, and investments will have to increase in order to compete, meaning a rise in cost and potentially adding to debt loads. If having a streaming service doesn’t prove to be the best use of resources, companies like WarnerMedia and NBCUniversal can go back to licensing to Netflix, though they seem committed to developing their own platforms. Right now, it’s really just Netflix and Disney, and both Netflix and Disney are just fine. Let’s circle back in six months.