- March will be a defining month for Netflix as Disney+ goes global.
- Walt Disney’s streaming is enjoying faster growth in the U.S. than Netflix in its early days.
- Disney’s strategy of “quantity over quality” may change the calculus in the online video streaming sector.
Walt Disney (NYSE:DIS) chairman and CEO Bob Iger described the media and entertainment giant’s Q1 2020 as a “great quarter.”
For Netflix (NASDAQ:NFLX), Walt Disney’s quarterly report is something to worry about. In less than two months, the House of Mouse’s streaming service Disney+ garnered nearly 30 million subscribers. It took Netflix half a decade to hit that figure.
Worse still for Netflix, Disney+ is just getting started.
Here are three reasons why Netflix’s quarter ending March 31 could be the last one before obituaries start pouring in.
Disney Plus is launching internationally in March
Netflix has been witnessing slowing growth in the U.S. This is its most lucrative market where it obtains the highest average revenue per user. Healthy growth in foreign markets has compensated for the tepid growth in its home country though. But that too is now under threat as Disney+ is going global starting next month.
Starting March 24th, Disney+ will launch in Austria, France, Germany, Ireland, Italy, Spain, Switzerland and the U.K. Disney will additionally launch in India on March 29th.
Given Walt Disney’s aggressive pricing on its streaming service and its more established brand, Netflix should brace for slower growth in its remaining frontiers of growth.
Netflix could be upended in the U.S.
In Netflix’s most recent quarter, the number of subscribers in the U.S. and Canada totaled 67.66 million. At the rate Disney+ is growing, Netflix could lose the pole position before summer in its most profitable market.
Between Nov. 12 and Dec. 28, Disney+ added 26.5 million users. That’s a growth rate of roughly 600,000 users per day.
By all accounts Disney+ looks set to exceed estimates handily. If the actual rate of growth remains constant throughout the quarter ending March 31, Disney+ could have at least 54 million subscribers in the U.S. by the end of that period. This would be just 13 million shy of Netflix’s total in both the U.S. and Canada in a fraction of the time.
Netflix’s “quantity over quality” strategy not working
Netflix has prioritized quantity over quality and is constantly churning out new content at a huge cost. In 2020 Netflix is expected to spend $20 billion on original programming and expensive licensing deals. That’s an increase of over 30% from last year. Disney+ budgeted nearly $1 billion on original content.
On the flip side, Disney+ has prioritized fewer new high quality productions and the success is astounding so far. In other words, the Mouse has chosen to nimble away in sustainable fashion while Netflix has elected to chomp raising the risk of choking.
Worse still for Netflix, the strategy does not look feasible in the long-term given the streaming service’s cash woes. For the full-year that ended December 31, Netflix’s free cash flow hit negative $3.3 billion. Walt Disney, on the other hand, ended 2019 with $6.6 billion in net operating cash flow.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.