Disney Plus: The Race to Compete With Streaming Giant, Netflix
Monday, May 13, 2019
Content supply chain efficiencies could make or break the new platform
Disney’s new streaming service, Disney Plus (also known as Disney+), is expected to grow to 60-90 million subscribers by 2024, per the Wall Street Journal. The vast library of Disney's and Fox's legacy content as well as new, exclusive TV shows and movies will certainly drive new subscribers, but will its content supply chain be robust enough to help them surpass Netflix’s 148.9 million subscriber base over the next 10 years?
Clearly, this is the first big move in the content arms race currently underway. To date we have seen Netflix’s enormous investment in online content licensing and original content, but Disney making plays to be a front-runner in the race for market share comes as no surprise. It’s possible that Disney’s content supply chain efficiencies could make or break this new platform.
Investors and consumers alike are cheering on this new streaming service to be successful, but I have a few questions that could determine whether or not they will be equipped for the challenge ahead.
- Does Disney have the infrastructure to integrate all their content, including Hulu and ESPN Plus, onto a single, easy to use platform?
- Is Disney positioned to deliver a top-notch user experience to build and sustain loyalty?
- How will Disney manage assets across the entire organization?
The way I see it, this platform’s content supply chain, and specifically how efficient it turns out to be, will be what moves Disney ahead of the pack. Netflix is known for its end-user experience and mammoth investments in original content, but its biggest differentiator is its supply chain, particularly when it comes to enabling such rapid expansion into niche, regionalized markets with uber-efficient anytime, anywhere distribution. One of Netflix’s shortfalls, however, is its inability to manage kid’s programming from G to PG 13 -- an area that Disney could leverage to move them ahead in this race for subscribers.
It all comes down to powering a streamlined media factory: deploying a content supply chain to stop budgets from skyrocketing out of control. With Netflix’s customer acquisition costs rising above $140 due to an exorbitant investment in marketing, there is certainly room for others to inch ahead.
Disney has the opportunity to improve its content supply chain by connecting and managing all its components across the organization, including Hulu and ESPN Plus, making it as flexible and organic as possible. For example, with AI they could reduce the time it takes to regionalize a particular piece of content by half, allowing them to scale more rapidly. Automation can help Disney compete in the content arms race, by delivering more volume of engaging content to their audiences in less time and at lower cost.
On the flip-side, don’t think for a second that the Netflix and Amazons of the world won’t step up their game to create better quality, less repetitive content to compete against the Disney giant. In addition to content, they may get very creative by providing flexible and financially enticing offers.
Netflix may be the largest threat, but let’s not discount social media and streaming gaming platforms, like Twitch. When will consumers be forced to choose, and will they become more of a binge-watching community and jump around from Disney to CBS All Access, etc., month-to-month? Let’s face it, the time to choose is now. Subscription platforms need to think carefully about the bundles and pricing they offer, to maintain viewership, but indeed today’s audiences are likely to favor providers that allow flexibility to tap in and out of different services and bundles.
In my view, this is a cyclical phenomenon, part and parcel of the TV industry: from a few networks offering a wide range of content, to multiplication of choices and services, just to return to consolidation. We are seeing a similar process in the streaming video landscape, with increased fragmentation (now with the impending launch of Disney Plus and, eventually Apple TV Plus), which will inevitably end up in consolidation again.
We are seeing the beginnings of consolidation in Europe with large content creators joining forces to offer joint OTT services, so they can compete with the streaming giants in terms of quantity, quality and cost. I wouldn’t be surprised if in a few years from now we saw a “spotifyzation” of video content, where viewers aren't forced to choose a specific content provider, but rather build their own playlists and favorites with content sourced from a variety of providers.