What if, instead of ‘Netflix and chill’, it was ‘Prime and chill’ or ‘Hulu and chill’? Sounds awkward? With a 51% share in the on-demand video streaming market, Netflix has ensured that it stays on top of the game and remains viewers’ favourite place to chill.
However, this market is getting overcrowded with regular entry of new players, who are snapping at Netflix’s heels and coming up with deals and strategies to topple it from its position. And the latest to do that is Disney, maybe a new kid on the video streaming block but a veteran in the entertainment segment.
Last week, Disney announced a complete takeover of Hulu from Comcast, further heating up the video streaming war, currently dominated by Netflix; Prime and Hulu’s market share is 33% and 14%, respectively, and YouTube, HBO, and Apple have entered as well to get their shares of the pie.
Apart from these global giants, the presence of regional players across the world intensifies the competition even more.
What’s Disney’s deal?
According to Reuters, Disney will take full control of American streaming giant Hulu, which has over 26 million active subscribers. Disney got Hulu’s ownership as part of the $71.1-billion acquisition of Fox, which is one of the biggest media acquisitions ever.
Disney has acquired a 66% controlling stake in Hulu, while Comcast owns the rest. As part of this deal, Disney has given Comcast the option to sell its stake to it beginning early 2024 at the fair market price or a minimum price of $27.4 billion, whichever is higher.
Rationale behind the deal
Disney wants to create a bundle of Hulu, ESPN Plus, and Disney Plus. While Netflix specialises in original content, Hulu dominates the niche of American television and cable services. Users can access various TV shows of production giants CBS, NBC, ABC, etc. Its cable services users, on the other hand, can get live streaming of various channels.
Disney Plus, on the other hand, is an on-demand online streaming service, the company’s answer to Netflix. It will give users access to the vast library of content from Disney, Pixar, Star Wars, Marvel, and National Geographic. Disney plans to launch the service on November 12 in the US.
A major reason why Disney isn’t going for an outright acquisition is because of its high debt. Disney piled on massive debt to fund the Fox deal; another of $20 billion wouldn’t have been viable.
According to Motley Fool, Disney also expects Hulu to run in losses until 2023. Furthermore, Comcast has a stake in Europe’s Sky Group. A control takeover removes the conflict of interest for Comcast, thus giving it the freedom to expand in the lucrative markets of Europe.
How does Disney’s deal affect the current players?
According to CNET, in a preview event in April, Disney had announced that its initial subscription of Disney Plus would be $7 a month, way lower than Netflix’s most popular $13 membership and half of HBO Now’s subscription fee in the US.
Industry experts believe that such a move indicates that Disney is betting big on its platform, and an aggressive strategy like this would certainly go a long way in acquiring customers.
Disney produced the top two movies in the last three years. With the recent acquisition of Fox, Disney has now got access to major banners, such as Marvel, along with hundreds of Fox Studio movies. Until now, these were available on Netflix; considering the deal, Disney has pulled them out to maintain exclusivity of its own streaming site. As a result, Netflix has lost successful shows, such as The Punisher, Daredevil, Jessica Jones, Luke Cage, and Iron Fist.
No Disney film since Captain Marvel has been released to a third party.
The move has not only hurt the competitors financially but also cut down their offerings. It has put pressure on Netflix to curate and invest more in its original content. In addition to this, there are also speculations that Netflix could lose rights to hugely popular shows Friends and Simpsons.
According to Indian Television estimates, the worst case for Netflix financially would be a loss of 4.2 million subscriptions out of the total 60 million, amounting to an annual revenue loss of $655 million.
What’s the future looking like for Disney?
Disney wants to be the go-to destination for online video content. Its bundle comprising Hulu, ESPN Plus, and Disney Plus would give it an advantage over its direct rivals, as it can cover a wide variety of content, right from sports to films, and even National Geographic documentaries.
Disney has also announced that it is going to invest billions in exclusive original content for its platform. It has announced three live action series to ride along the immense success of its blockbuster Avengers: Endgame.
Of the three shows, currently unnamed, one is on Loki featuring Tom Hiddleston, another on Falcon and Winter Soldier with Anthony Mackie and Sebastian Stan, respectively, and the third on WandaVision starring Elizabeth Olsen and Paul Bettany in the roles of Scarlet Witch and The Vision.
Other big announcements include big budget series—Mandalorian (events after Return of the Jedi) and a Star Wars prequel. These projects are in addition to the tons of originally created documentaries, animations, reality shows, TV series, and films released round the year under the Disney banner.
Should players in the Indian market be worried?
Regional players across the globe would definitely need to be wary of Disney’s plans, especially because the company has announced that it will be available worldwide in two years.
Currently, regional players do have an edge and a head start over Disney, as they offer a variety of locally curated shows, which cater to the ideologies and cultural beliefs of their viewers; however, they lack the deep pockets needed to sustain in the long run.
In the Indian context, it would be interesting to see how Voot and Viu brace themselves for Disney’s entry here. Hotstar, though, is unlikely to be perturbed by these developments as Star India was one of the major brands under the bumper Disney-Fox deal.
But you never know… there might be yet another acquisition around the corner, shifting the balance in favour of one player.
Hemant Agarwal is a Writing Analyst at Qrius.