Why Disney Has Stopped Chasing Netflix
In 2007, Netflix effectively invented streaming media with its service formerly entitled Watch Now.
The business proved so instantly successful that the former DVD-by-mail delivery service quickly pivoted to go all-in on streaming.
Photo: Getty Images/Ringer illustration
After just four years, Netflix prepared to abandon its roots entirely by spinning off its DVD program, although those plans collapsed once fans revolted.
Still, Netflix’s sudden ascension caught the attention of conventional media businesses, including The Walt Disney Company.
Photo: Getty
CEO Bob Iger once described his business model as selling weapons to the enemy. He effectively disavowed Netflix and developed his own service.
At the time, the idea called for Disney to surpass Netflix and become the preeminent streaming service on the planet. Alas, those plans have changed.
(Photo by Jesse Grant/Getty Images for Disney)
Disney has stopped chasing Netflix for now, as the competitive gap is too sizable. However, Disney is now separating itself from the rest of the competition.
Here’s what’s happening with Disney’s streaming services.
About the “Race”
Photo: English Jargon
Even Disney executives were taken aback by the initial success of Disney+.
They had forecasted that the service would gain ten million subscribers by the end of 2020.
Photo: Getty Images/Ringer illustration
This press release came out on November 12th, 2019. Friends, Disney+ debuted on November 12th!
That’s how instantly popular the Disney service was, and it’s easy to understand why.
The previous generation of content consumers watched helplessly as the company locked many of its timeless classics behind a virtual wall known as the Disney Vault.
Nobody could even pay to purchase many of these titles, at least not when they wanted. Occasionally, Disney would release the classic titles on VHS and DVD.
Photo: Marketrealist
When that happened, consumers possessed a limited-time opportunity to buy their favorite stories.
With the advent of Disney+, the Disney Vault collapsed overnight. Suddenly, subscribers gained access to virtually every title Disney had ever released in theaters.
Image: The Wall Street Journal
Also, a treasure trove of former Disney television classics anchored the service, including a handful that starred Walt Disney himself.
So, the intense, immediate popularity of Disney+ really shouldn’t have surprised anyone.
Photo: Netflix
The runaway success during the streamer’s early days created lofty expectations, though.
At one point, many analysts (and I was one of them) felt strongly that Disney had a chance to surpass Netflix in subscriber count.
Let’s briefly discuss the alleged chase and why Disney has given up on it.
The High Cost of Subscriber Count
Photo: @Chalabala | Twenty20
On a bleak day during March of 2020, the entire world woke up one morning and realized it wouldn’t be safe to go outside.
The pandemic restructured society overnight, changing the very nature of our daily routines as many people suddenly worked from home for the first time in their lives.
Photo:Ivan Marc / Shutterstock.com
At this point, Disney+ had already gained 26.5 million subscribers, absolutely blistering its expected pace for growth. The pandemic accelerated its gains.
With no other viable businesses stable at the time, Disney officials thrust most of their support into their streaming services.
Photo: Disney+
Disney prioritized a three-headed monster of Disney+, Hulu, and ESPN+, and the strategy again worked better than expected. Mostly.
By the end of 2020, the first full year of Disney+, the service had somehow grown to a stunning 73.7 million subscribers.
Deadline
Disney had also taken full control of Netflix at this point, despite the fact that Comcast owned one-third of the streaming service.
Hulu’s subscriber count at the time was 36.6 million, while ESPN+ claimed 10.3 million. So, Disney’s trio of streaming services totaled 120.6 million subscribers.
Photo: Netflix
At this point, Netflix had accumulated 192.9 million subscribers, and a path was laid out for Disney to catch and potentially even pass its competitor in total subscriber count.
There was a catch, though. Disney was bleeding money as it massively overpaid for new content, a lot of which subscribers didn’t even have the time or inclination to watch.
Photo: simplemost.com
In 2022, Disney increased its content spend to a historic $33 billion, a decision executives quickly regretted.
During the fiscal fourth quarter of 2022, Disney’s streaming services lost $1.47 billion, which shouldn’t have surprised anyone.
A Philosophical Change
(Photo by JC Olivera/Getty Images)
The Board of Directors fired Bob Chapek soon afterward, as they were irate about the losses. Since Bob Iger’s return, Disney has given up the chase.
That’s notable in that Disney could have more subscribers than Netflix if it wanted. I realize I sound like a heretic stating that, yet it’s true.
(Photo by Jerod Harris/Getty Images for Vox Media)
At the end of 2022, Disney+, Hulu, and ESPN+ totaled a combined 235.7 million subscribers.
Conversely, Netflix stood at 230.7 million subscribers. People forget this now, but Disney had passed Netflix at one point.
What changed is that Disney stopped throwing money at the problem, adopting a more frugal approach instead.
Currently, the three streaming services combine for 203.1 million subscribers, which sounds bad on a surface level.
disney netflix
A company shouldn’t want to lose 12 percent of its subscribers in a bit more than two years.
That’s especially true when you consider that Netflix has surged to 301.6 million subscribers. And that’s the whole point of this conversation.
Photo: Newsweek
Disney isn’t trying to win the streaming wars in the short term by adding subscribers at all costs. In fact, all that matters now is cost.
The company has reduced its content spend to $23.4 billion, a drop of nearly $10 billion in just two years.
Photo: Hulu
Not coincidentally, its streaming media division will turn a profit of more than $1 billion during fiscal 2025.
That’s dramatically different than the $4 billion loss the company suffered in fiscal 2022.
Photo: Netflix
By dropping the subscriber chase, Disney has improved its net streaming revenue by $5 billion in three years.
Disney is no longer focused on winning the subscriber battle but rather on profitability.
Disney’s Streaming Hits
Photo:cnet.com
Now that you understand the meta here, let’s quickly discuss streaming ratings for the week of April 27th through May 4th.
I covered the big story last week. It’s Andor, which improved even more during its second batch of season two episodes, claiming 821 million viewer minutes.
Photo: Lucasfilm
The Star Wars show isn’t far away from the biggest hit on Disney+, Bluey, which managed another 870 million viewer minutes.
We recently learned that the Australian people has earned 70 billion viewer minutes since the start of 2024.
Photo: Disney+
Here are Disney’s other streaming hits for the week in question:
- Grey’s Anatomy – 927 million viewer minutes
- The Rookie – 670 million viewer minutes
- NCIS – 659 million viewer minutes
- The Handmaid’s Tale – 612 million viewer minutes
- Good American Family – 376 million viewer minutes
- Family Guy – 578 million viewer minutes
- Moana 2 – 246 million viewer minutes
Photo: Disney
The only two points I want to make this week involve titles on this list. The first is that while The Handmaid’s Tale was heading to a finish at this point, the story wasn’t done.
Disney has greenlit a sequel series called The Testament, which is already in production. So, we’re getting more stories from this universe.
Photo: Disney
Also, as Moana 2 slides off the charts, I’ll highlight one thing that has changed since the inception of this media column.
At the start, Disney+ absolutely dominated the Movies chart, sometimes having as many as eight titles.
Photo Credit: Netflix.com
Nowadays, that segment is all Netflix, which circles back to the main point. Disney’s reduction in content spend cedes this category to Netflix.
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