With 193 million global subscribers, Netflix (NFLX +0.09%) enjoys a comfortable lead over its rivals in the streaming industry. But Walt Disney's (DIS +0.14%) direct-to-consumer business is hard on its heels. Disney's streaming package, which includes Disney+, ESPN+, and Hulu, has several massive advantages over Netflix. And this means it could soon begin taking market share from its larger rival.
Disney offers three robust streaming platforms for the price of one. And the combined package seriously outcompetes Netflix in live sports content and established intellectual property. Here are two reasons why Disney could end up winning the streaming war over the long term.
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1. Live Sports
The streaming industry is becoming extremely competitive because of its low barriers to entry. Large media companies can easily set up streaming platforms and get licenses to host unoriginal movie and videos -- that's why the winners in this industry will need to build a moat for themselves by offering content their competitors can't replicate.
Disney has a major advantage over Netflix because of its ownership of ESPN and access to exclusive live sports.
ESPN+ is the fastest-growing segment in Disney's direct-to-consumer business with subscriptions growing 20% quarter over quarter and 259% year over year to 7.9 million. The segment can drive future growth through its partnerships with major sports leagues like the NFL, NBA, and MLB as well as the rapidly growing UFC. Netflix, on the other hand, doesn't offer live sports and has no plans to do so, which means it will lose out on this fast-growing market.
ESPN+ is bundled with Disney+ and Hulu at a competitive price of $12.99 per month, the same price as Netflix's standard package.
2. Intellectual Property
Netflix is investing heavily in original content to help bolster its shallow moat and compete with its rivals -- going so far as to promote its chief content officer, Ted Sarandos, to co-CEO in the second quarter. But despite Netflix's best efforts, original content looks like an area where Disney has the inbuilt advantage because of its established film studio and treasure trove of intellectual property.
Disney owns some of the most valuable intellectual property on the planet with franchises like the Marvel Cinematic Universe, Star Wars, Pixar, and National Geographic. It also has the opportunity to add new Disney films to the platform when they are released without the expensive licensing fees competitors will have to pay.
The company has a big opportunity to expand its original content offerings on Disney+ and Hulu. There are plenty of new titles on the way, including Marvel's WandaVision and highly recognizable kids shows like Lizzie McGuire and Phineas and Ferb.
Disney's $71.3 billion purchase of 21st Century Fox gives it access to an even wider array of intellectual property including Titanic, Family Guy, and The Simpsons, which is already available on the platform. It's hard to see how Netflix will be able to maintain its dominant market share against Disney's massive advantage in established intellectual property.
Takeaway
Disney's streaming package has evolved into a Netflix killer because of its live sports content and massive intellectual property advantage over its larger rival. While Netflix is investing heavily in its original content, it will struggle to compete with established brands like Marvel, National Geographic, and Pixar, which are at the beginning stages of on-demand monetization.
Disney is poised to win the streaming war, and on-demand subscriber growth looks likely to exceed expectations over the long term.
