Netflix (NASDAQ:NFLX) shares drifted lower earlier this month after Disney (NYSE:DIS) hosted a media event in which it spent more than three hours providing details for its upcoming premium video-streaming service. Disney+ is going to be a major player out of the gate, and it was easy to see why the top dog in this booming niche took an initial hit.
Everyone concedes that this will never be a winner-take-all niche. There are a couple of thriving premium music platforms, and there's no reason why there won't be several winners in video. The opportunity is even greater in streaming video since folks have historically paid more for video than audio entertainment. There is also less content overlap in video, making it essential for video buffs to subscribe to several platforms to stay on top of trending water-cooler chatter. A new Morgan Stanley survey provides some interesting insight on that front, showing why Netflix and Disney can both be big winners in the coming years.
Marvel's The Defenders should help save Netflix from the Disney empire. Image source: Netflix.
Streaming is the new bundle
Morgan Stanley has concluded the firm's annual streaming video survey, and analyst Benjamin Swinburne has some encouraging news for Netflix, Disney, and even Amazon.com (NASDAQ:AMZN).
Half of the survey's Netflix users also rely on Amazon Prime Video for some of their streaming activity. That may not come as much of a surprise since there are now more than 100 million Amazon Prime customers, and the Prime Video service is available for them at no additional cost.
The more encouraging nugget for Netflix is that 64% of Prime Video users also subscribe to Netflix. Having an Amazon Prime subscription that offers access to video is apparently not enough for nearly two thirds of those users. They need their Netflix fix, and it's an even bigger craving for Hulu users. Swinburne's study shows that a whopping 81% of Hulu subscribers -- a platform that is now majority-owned by Disney -- also use Netflix. In short, Netflix seems to be the "basic cable" of streaming video, the foundation that all other services are built upon.
Turning the survey's attention to Disney, 37% of the participants indicated an interest in subscribing to Disney+ -- a figure that rises to 60% of the respondents who have children. The survey proposed Disney+ costing $8 a month, before the media giant shocked the world with its brazen $6.99-a-month price point.
The moral of the story here is that folks aren't picking sides. If Disney+ does have 60 million to 90 million subscribers in five years -- as the House of Mouse was forecasting earlier this month -- it doesn't mean that those eyeballs will come at the expense of Netflix, Hulu, Amazon Prime Video, or whatever other platforms are trending come 2024. There will be some dilution and an inevitable shakeout of weaker players, but it's unfathomable to think that Netflix and Disney+ can't both be huge in a few years. Disney has an unmatched catalog of content going into this niche. And Netflix can spend more on content than anyone, with its nearly 150 million paid streaming subscribers worldwide.