(BFM Bourse) – In the world of video on demand, Disney + and Netflix are waging an all-out war. Launched later, Disney’s platform is advancing its pawns and is even beginning to outrun the American pioneer who, for his part, is suffering from subscribers’ lack of love for his services. What is felt in the stock market.
Mixed fortunes at the two global streaming giants Netflix and Disney. Netflix is seeing its superiority eroded as new competitors emerge in the hotly contested online entertainment market.
The first has a string of disappointments, the latest of which has not left him unscathed. Netflix collapsed on April 20 on the stock market after losing subscribers in a quarter, a first in 10 years! Three months earlier, the American group had already warned of a slowdown in the growth of its subscriber base. However, the latter remains important, with nearly 222 million paid subscriptions. On the stock market, the sanction was immediate, marked by a 37% plunge in the share price. More than 50 billion dollars of capitalization went up in smoke on the session of April 20th alone.
To make matters worse, investors will take legal action against Netflix. In particular, they accuse the streaming platform of having deliberately hidden certain information, including the erosion of the number of subscribers in the first quarter of 2022. Netflix has indeed lost 200.00 subscribers when it expected to recruit 2.5 million newcomers. subscribers over the past quarter. With the market loving to burn what it has adored in the past, it has punished Netflix unceremoniously for its weak outlook, with the stock dropping nearly 70% year-to-date.
Disney is catching up
Disney shareholders are very far from turning against the entertainment giant. The strong growth in the number of subscribers to its Disney+ platform, launched at the very end of 2019, is delighting investors. In more than two years, at the end of March 2022, the group has brought its total number of subscribers to 133.7 million, with an increase of nearly 7.9 million in the past quarter alone and even beating its own expectations! Disney expected to recruit 5.3 million new users between January and March. A figure that contrasts with its great rival who lost 200,000 subscribers over the same period.
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. The group again exceeded expectations of more than 2 million subscribers between January and March. The forecasts are also in good shape, the group from Burbank in California expects an increase in subscribers to Disney + over the period from April to September compared to the first half of its staggered financial year (October to March) reports its financial director, Christine McCarthy.
Disney also reiterated its goal of reaching 230-260 million Disney+ subscribers by the end of 2024, which could put it ahead of Netflix if everyone continues at the current pace. 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 to all of its content in 2022, up from $8 billion a year, including $22 billion for content not dedicated to sports, namely documentaries and fiction. More than what Netflix should invest over the same period…
The stock market changes horses
In the latter, the hemorrhage of subscribers is far from contained. Netflix expects to lose two million subscribers in the current quarter compared to the previous one. Reed Hastings, the co-CEO of Netflix is now ready to market a cheaper subscription offer but with advertising, a formula that has proven itself at HBO Max and…Disney +. Initially scheduled for 2023 or 2024, this alternative offer should be launched at the end of 2022, according to the New York Times. To relaunch, the pioneer of streaming is therefore forced to abandon its historical position which, until now, has given up integrating advertisements into its programs.
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 190 billion dollars in “market cap”) for Disney against 76 billion for Netflix this Friday).
In fact, when the Netflix action is down 70% since January, Disney is holding up much better with a drop of “only” 31%. If the market has been at half mast for several months, it should also be noted that the two giants offer “pleasure subscriptions” which could be quickly cut by households if inflation persists for too long.
Sabrina Sadgui
©2022 BFM Bourse
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