(BFM Bourse) – In the world of video on demand, competition is fierce. Launched later, Disney now has 130 million subscribers and is more than ever a scarecrow for Netflix, whose growth is running out of steam.
Diametrically opposed growth trajectories for the two global giants of streaming what are Netflix and Disney. While the first collapsed on January 21 on the stock market (-21.8%) following the announcement of lower than expected growth in the number of its subscribers, the second saw its annual publication positively received on Thursday, even if the progression of the Disney title was reduced at the end under the effect of the general decline of the market caused by inflation higher than expectations.
In addition to the solid rebound in attendance at its amusement parks during the end-of-year celebrations, Disney was also able to count on a further strong increase in the number of subscribers to its Disney+ platform, launched at the very end of 2019. In two years, at the end of December 2021, the group increased its total subscriber base to 129.8 million, with an increase of nearly 35 million last year (+ 37%) and 11.7 million in the past quarter. In 2021, Netflix only recruited 8.3 million additional subscribers. Even if the pioneer (the beginnings of its streaming platform date back to 2007) still has a total of nearly 100 million subscribers more than its rival (221 million at the end of December).
More than past performance, the market has mostly punished Netflix for its weak outlook, with the entertainment heavyweight expecting only 2.5 million new subscribers for the current quarter, well below the consensus of analysts polled. by Factset (5.8 million) – you also have to go back to 2010 to find such a low figure for a first quarter, when Netflix only had 13.9 million subscribers at the time!
On the other hand, Disney, through the voice of its new CEO Bob Chapek (who succeeded another Bob, Iger) reiterated its objective of reaching 230 to 260 million Disney+ subscribers by the end of 2024, this which could put it ahead of Netflix if everyone continues at the current rate.
In short, the momentum is clearly in favor of the world’s No. 1 in entertainment. As proof, Disney has got into the good habit of doing much better than the consensus, in particular regarding the growth of the VOD subscriber base, an element deemed critical by the market. After adding 3 million more Disney+ subscribers than analysts had expected between April and June 2021, the group again exceeded expectations by nearly 5 million subscribers between October and December.
“Disney is off to give Netflix a hard time,” warns Tuna Amobi, an analyst at CFRA. “They are on a faster trajectory and it is not surprising. (…) Disney has a huge reserve of content, recognized names and global franchises”, with obviously Walt Disney Pictures but also Marvel, Pixar, Lucasfilm or even 20th Century Studios.
Still young, Disney+ is betting everything on growth, and only plans to reach financial equilibrium in 2024. Disney thus plans to devote an envelope of 33 billion dollars to all of its content in 2022, an increase of 8 billion over one year, including 22 billion dollars for content not dedicated to sport, namely documentaries and fiction. More than what Netflix should invest over the same period, analysts betting at this stage on an overall envelope of 19 billion for the Los Gatos group in 2022, after 17 billion in 2021.
And if Disney is still gaining a lot of subscribers in the United States, unlike Netflix which has already almost saturated the market, the battle is now being played out internationally, where the number of paying accounts has grown by 40%. in one year. The two industry leaders are sinking huge sums into content production outside the United States in an attempt to get their hands on the slices of this growing pie. And they are not the only ones, since Amazon (via its Prime Video offer) has also entered the battle by investing in lost funds (for the moment).
HBO and its HBO Max service does not seem to have the same firepower, counting today only 27 million subscribers outside the United States (73.8 in total), but its planned marriage with Discovery, its Discovery + platform and its 20 million accounts, which will be finalized in the spring, could reshuffle the cards.
To return to the two champions of the sector, the dynamic has also been largely reversed on the stock market, since Netflix weighed 20 billion dollars more than Disney in mid-November last, and now lags behind by more than 100 billion (at nearly 280 billion dollars of “market cap” for Disney against 176 billion for Netflix this Friday).
Quentin Soubranne – ©2022 BFM Bourse
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