The immense success of Disney+, the subscription streaming platform from Walt Disney (DIS 1.12%), has exceeded just about any reasonable expectation. The service went from zero to more than 60 million subscribers in less than a year, establishing itself as a serious player in the streaming wars. But with almost 200 million subscribers worldwide, Netflix (NFLX 0.40%) is still the behemoth, and with massive room to keep growing in a world with billions of people looking for entertainment.
On the Nov. 12 edition of "The Wrap" on Motley Fool Live, host Jason Hall engaged Motley Fool analyst Jim Gillies and Motley Fool contributor Danny Vena in a debate on Disney's prospects to grow Disney+ even bigger than Netflix. Despite Netflix's big lead in subscribers, and big spending on content, no company has a more expansive collection of popular content than Disney.
Transcript:
Jason Hall: Will Disney+ ever be bigger than Netflix?
Jim Gillies: I'm going to go with no, and here's why. I've always equated Disney+, and I'm a happy Disney+ subscriber; The Mandalorian, the television show which they're running in the Star Wars Universe, the live-action Star Wars Universe.
Jason Hall: It's fantastic.
Jim Gillies: It has restored my belief in Star Wars under Disney because I'm not a huge fan of the "sequel trilogy" as they call it. The first one was fine. I actually quite enjoyed the second one even though it maybe tried to subvert expectations in a way that some people didn't appreciate. The third one was god awful and the less said about that the better, but The Mandalorian has restored my belief that Disney can do good Star Wars and so that alone, it's enough for me to subscribe to Disney+.
But Disney+ and Netflix suffers from what I'd like to call 'the breakfast problem'. You have yourself some eggs and bacon for breakfast. The chicken is involved; the pig is committed. Netflix is the pig. They are all in, this is what they do, this is their entire raison d'etre.
Disney has 82 other things they're involved with. Yes, they've got Disney+, and it's a big part of the business. But they've got the theme parks. You may have heard of a little thing called Hulu, you may have heard of a little thing called Disney Cruise Lines, not going on those right now. You may have heard of ESPN, ABC. I've been on a Disney Cruise, pray for me, and I will say that the marketing engine is relentless. If Disney+ were to be an abject failure, and of course, it's not, a lot of people are going to give you 80, 90 bucks a year for the Disney+ subscription.
But in terms of being as large as Netflix, where Netflix is almost exclusively focused on being that one thing that's streaming service for everyone and just little things like the user interface for Netflix. In our house, me and my partner routinely we'll drop a few adult friendly words in regards to using the user interface for every streaming service we have except Netflix, and she's always like, "Why doesn't everyone just emulate what Netflix does?" Because it's just easy, it's seamless to get through. I've never owned Netflix more fool me. But I admire what they've built, what they've done, and like I said, they are committed. For Disney, this is a piece of their business, is perhaps a big piece of their business, but it's ultimately not. It can never be as important to them as what Netflix is too, well, Netflix.
Jason Hall: Little bit of concentration there, that's for sure. Danny Vena, I know you're a proud happy shareholder of Netflix and Disney both. What do you think?
Danny Vena: I will take the contrary inside of the coin, just because if you look at what Disney has done over the course of just 12 months. Now, granted, it got tailwinds from the pandemic. But Disney+ already has 60 million subscribers and probably more. It had 60 million by the end of last quarter. So I'm waiting to hear what they're up to now.
It took Netflix years to get to 60 million subscribers. We live in a different world now. Netflix is up to about 195 million subscribers, I think Disney can get to that many subscribers and more because of that relentless marketing engine, that Jim talked about. They have this content creation thing and the mass marketing of one segment to another. They've got that down to a science. So they know exactly how to eat each little dollar out of their followers. I would say it's probably not going to be too many years from now.
In fact, I might even go so far as to say by 2024, when Disney+ was planning on having 60 million subscribers, I wouldn't be surprised if they are closing in on 200 million.
Jason Hall: Yeah. I'm torn on this. I really am -- to Jim's point about the concentration of Netflix and, this is it, this is their business. They have to grow subscribers. That's entirely what they do.
(But) I lean toward, yes, with this caveat. I think undoubtedly Disney's streaming businesses, streaming enterprise, so Disney+, ESPN, whatever versions of ESPN, ABC, Hulu, all of those things, even if you adjust for people that subscribed to multiple services, unique subscribers, I think they're definitely going to be the largest in the world within a decade, maybe even within five years.
Disney+ itself, it depends on what they decide to build into. I think that's the big thing for me. If it just remains the original content and it's not sports and all the other things that are probably going to keep live (streaming), probably not. But I think they just have such a head start (in content.)
Netflix is throwing tons and tons of money at building content. Disney could stop making content right now and still be generating free cash flow in a century. [LAUGHTER] I just have a lot of belief in the portfolio of intellectual property that they already own. Is going to continue to be very, very productive for a long time. So we'll see what happens, but it's fun to think about.
