Tag Archive: disney

  1. Disney versus Netflix: The AVOD battle

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    For years, Netflix was the king of the streamers, enjoying a near-monopoly of the streaming market and steady growth of its subscriber growth across the world. Recently, however, it has come against increasing competition from the likes of Amazon Prime, Peacock, HBO Max, Apple TV and especially Disney+. Disney+, The Walt Disney Company’s streaming platform, has enjoyed stratospheric growth over the last few years, and its results so far this year far outshone Netflix’s. With both platforms taking their offering to the next stage later this year by launching their ad-supported tiers within weeks of one another, we look at the state of play and explore what the war between the platforms means for advertisers.

    2022: The year Disney’s long-term plan paid off

    The growth of Disney+ into one of the biggest streaming platforms in the world may seem like a recent phenomenon but it is the result of a carefully thought-out, 15-year-long strategy to reinvigorate the Disney empire. Of course, there were other factors at play; a global audience primed by Netflix for streaming, and the serendipitous launch of Disney+ just as the world went into lockdown and people were eager for entertainment and relief. But content is king when it comes to winning in the streaming industry, and that has been Disney’s relentless focus since the mid-2000s. Major acquisitions have included Pixar in 2006, the Marvel Comics superhero universe in 2009, George Lucas’ Lucasfilm (including the Star Wars franchise) and 21st Century Fox in 2019 (which included operational control of Hulu). The resulting content base was ripe for the launch of Disney+ and, with content that was so much more famous and abundant than Netflix’s, it’s not surprising that Netflix is struggling to keep up.

    The rise and rise of Disney+

    As already mentioned, Disney+ benefited from the fortuitousness of launching an on-demand streaming platform precisely at a time when people needed at-home entertainment more than ever before. But even taking that into consideration, its growth has been remarkable. It had reached 100 million subscribers just two years after launch, far exceeding its goal of 60-90 million users by 2024. By comparison, it took Netflix a decade to reach 100 million subscribers, despite a much less competitive market – although it was also creating that market as it went along. Recently, there have been concerns among investors that the streaming industry is slowing down – concerns that were fuelled by Netflix’s results in the first two quarters of this year. But Disney has defied these worries: subscribers to Disney+ reached a new high of 152 million in the third quarter of this year, having added a remarkable 14.4 million in the second quarter. When the Disney+ tally is added to subscriber numbers for Hulu and ESPN, the total number of subscribers for platforms owned by The Walt Disney Company amounted to 221 million, surpassing that of Netflix.

    Netflix’s struggle to stay ahead

    Netflix is still the single biggest streamer, with just over 220 million subscribers, but 2022 has been a difficult year for the company. Their numbers seem to be following a pattern of stagnation, losing 200,000 in Q1 and a huge 970,000 in Q2. They are of course at a different developmental stage to Disney+, and at least part of Netflix’s stagnation is down to saturation as well as other factors such as the rising cost of living and the end of lockdown restrictions. However, content is also an issue: Netflix does not have a back catalogue of the scale of Disney’s, and Disney and many other media companies are ending the licensing of their content to Netflix so they can use it on their own platforms.

    Netflix’s challenges and its disappointing results earlier this year prompted it to announce that it would be introducing an ad-supported tier to its platform. This caused ripples of excitement across the advertising industry, which has always been eager to target audiences which can otherwise be hard to reach. Netflix had been planning to launch the new AVOD platform in early 2023 but when Disney+ threw its hat into the ring with a launch date of 8th December, Netflix brought its launch forward to early November.

    Disney versus Netflix AVOD: The clash of the titans

    So, Netflix and Disney+ are going head-to-head with launches of their AVOD platforms within weeks of one another. This will be an exciting and transformative time in the advertising industry: a sizeable proportion of Netflix’s audience, for example, is notoriously difficult to reach via other channels. So, what will advertising on these platforms entail? As things stand, we know more about Netflix’s proposed offering than Disney+, although we do know that both are anticipated to have a light ad load, with about four minutes an hour for TV series. Disney is expected to start with 15-30-second spots, but will expand to a ‘full suite of products’ over time.

    While Disney+ executives will be able to rely on the company’s past experience with advertising, both on cable TV and on other platforms it owns. For Netflix, however, this is fresh territory – although they have hired experts with plenty of advertising experience, and have partnered with Microsoft to build their AdTech capabilities.

    There has been more reporting on Netflix’s proposition. In early September, ad buyers were asked to submit initial bids, with a ‘soft’ CPM of $65, well above the industry average CPM of under $20, and similar to premium NFL CPMs. Netflix is asking advertisers to make a $10 million annual commitment, but with limited targeting: during the first phase, brands will be able to buy against top viewed series and some content genres, but not against geography (except country), age, gender, viewing habits or time of day. Movies are expected to have pre-rolls only, and frequency capping will be low by industry standards – one per hour and three per day.

    Challenges ahead

    By launching their ad-supported tiers within weeks of each other, the two biggest global streaming platforms are going head-to-head in a new field. They are facing a difficult market: with rising inflation and the growing cost of living, consumers will be looking to make cuts, and streaming subscriptions may be seen as a luxury. Of course, the streaming giants will be hoping that the introduction of their AVOD platforms will help to mitigate this, but it won’t be easy, especially if they are to avoid cannibalization of their premium, ad-free tiers. It will be fascinating to see who plays the AVOD cards better.

    This is an exciting moment for advertisers – not only will they be able to reach new audiences, but investment in the infrastructure around advertising in streaming will create exciting new opportunities and capabilities. The industry will look on with interest as the two companies lands on a defined pricing strategy – we will come back with analysis when it is available.


  2. Is Netflix ready for the launch of rival platforms?

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    Make or break for Netflix

    A couple of weeks ago, Bank of America Merrill Lynch told clients that Netflix’s Q3 figures, out later today, would be ‘make or break’ for the streaming platform, and would indicate whether it would be able to effectively compete with new rival platforms from the likes of Disney and Apple. It’s been a difficult few months for Netflix – its share value has plummeted by nearly 30% in the last three months, and subscriber levels fell short of the company’s own guidance in Q2. Whether those subscriber levels have recovered will be of particular interest in the Q3 results – and investors will be looking for signals that they can retain that recovery as competitors launch their streaming platforms.

    Who are the competition?

    So what does the competition look like for Netflix? Apple and Disney are launching their streaming services next month: Apple TV+ on 1st November, and Disney Plus on 12th November in the US, Canada and the Netherlands, with other markets in the months afterwards. This makes strategic sense, particularly for Disney, as it can piggyback on the marketing for its big-budget holiday-season films, and Netflix has shown over the last few years that it gets its biggest viewership in the last couple of months of the year. WarnerMedia’s HBO Max and NBCUniversal’s streaming service will be launching in early 2020. So Netflix’s battle to keep its subscribers loyal – and grow its customer base – starts now. Convergence Research Group, which tracks the streaming industry, predicts that its 47% share of the streaming market in 2018 will decrease to 34% by 2022, as reported in an LA Times article.

    Original content will be increasingly important

    This decrease will in part be down to the fact that Netflix will be losing some of its most watched shows to its competitors: ‘Friends’, for example, will go to WarnerMedia’s streaming service in early 2020, while ‘The Office’ will be shown by NBCUniversal from January 2021. With adults spending only around 30% of the time they spend with Netflix watching Netflix Original content, it looks like this could have an effect on Netflix’s subscriber numbers.

    However, Bank of America Merrill Lynch told investors that he believes Netflix will have time to ramp up production of original content while its rivals work on building their subscriber bases. This will means that Netflix will need to continue its huge investment into original content – this year it is estimated to have spent around $16 billion dollars, and Pivotal Research Group estimates that this will have climbed to a giant $35 billion by 2025. This needs to be funded from somewhere and Netflix’s capacity to raise subscription fees – its fallback option to date – will be stymied by increased competition. Netflix could also consider increasing its debt, introducing ads, investing in innovation (such as the ‘Bandersnatch’ episode of ‘Black Mirror’, where viewers could choose what the main character did next), or harnessing the vast wealth of data they have on what people like to watch, and where.

    A core part of the streaming bundle?

    Netflix’s choppy year has made investors a little nervous, which is why so much rests on the figures that it is releasing today. But many think that things will be ok. Mark Mahaney, lead internet analyst at RBC Capital Markets, for example, told CNBC that most people will want to use more than one streaming service, and it’s likely that that will mean Netflix plus another – Netflix will be a core part of the bundle. He believes that Netflix has the scale advantage and better brand name, content, global distribution and partnerships than its competitors, which bodes well for the future. Time will tell!

    What does this mean for advertisers?

    TV is still a crucial medium for advertisers, but with viewers having more and more ad-free options from the new streaming platforms, it will become increasingly difficult to reach their hearts and minds. What’s more, they are likely to be less forgiving of higher ad loads on the ad-funded free-to-view channels. This means that the most effective media channels will likely become more expensive, and the wise ones may well have fewer, higher impact ad spots for which advertisers will pay a premium. Furthermore, the growth of addressable TV will allow for more targeted and therefore more engaging ads, and lower levels of rejection by the consumer.

    Image: Shutterstock

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