Please ensure Javascript is enabled for purposes of website accessibility

Disney Could Spend $15 Billion on Content Annually: Can Netflix Compete?

By Parkev Tatevosian, CFA – Updated Aug 10, 2021 at 4:37PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The streaming giants are ramping up spending on content.

The Walt Disney Company (DIS 0.85%) is known for producing excellent content and being home to some of the industry's most valued media assets. The House of Mouse is making a push into streaming content, which could put pressure on Netflix (NFLX 1.09%) (NFLX 1.09%)

The streaming pioneer has a multi-year head start against Disney and has already amassed a subscriber total of over 200 million. Disney is making up ground quickly. Disney+ launched in November 2019, and already has over 100 million subs. The initial success gave Disney's management confidence to push more chips to the table, committing to spending $15 billion at the midpoint on content in 2024. Can Netflix hold its own against the longtime media powerhouse?

A person in bed watching something on an electronic device.

Image source: Getty Images.

Content wars 

Netflix often says that competition from other streaming services is not hurting its own results. At first glance, that may not be easy to believe. The streaming market has exploded with fresh alternatives over the last couple of years. However, if you consider that the addition of several streaming service providers makes it more likely customers will cancel their cable TV or satellite service, Netflix's argument makes more sense. Indeed, according to Nielsen, streaming consists of just 27% of U.S. screen time, while linear TV holds a much larger time slice of 63%.

Netflix's basic membership costs $8.99. Disney's bundle that includes Disney+, Hulu, and ESPN+ can be had for $13.99 per month. Given these low prices, there is room for a household to have multiple streaming subscriptions.

Certainly, Disney's announcement that it will be spending $15 billion on content in 2024, combined with popular media assets like Star Wars and Marvel, will make it a formidable option for consumers. Indeed, of the all-time top 10 grossing films at the box office, seven of them are owned by Disney. Such is the popularity of Disney's assets.

But Netflix is no slouch in the content spending category, either. In 2019, Netflix spent $14.6 billion on content, and $12 billion in 2018. The streaming pioneer has 209 million subscribers and brought in revenue of $7.3 billion in the most recent quarter. This large base of revenue gives Netflix plenty of firepower in the competition. The difference will be that Netflix does not have as high a quality of media assets to build upon.

What this could mean for investors 

In the end, this battle between streaming giants should be great for viewers. More spending on content is likely to result in lots of great films and shows to watch. If that attracts more people to the services, then investors will win also. The goal of these streaming providers should not be to compete against each other. Rather, they should be competing against other entertainment options. There is room for several winners in this rapidly expanding market.

Disney and Netflix would like to siphon attention from Alphabet's YouTube, and even Facebook. Folks only have a limited time they can spend on leisure, and if you are watching videos on YouTube, you're not on Netflix. Similarly, if you're browsing on Facebook, you're not watching Disney+. 

Therefore, investors looking at streaming providers boosting spending on content can think of it as a good thing for the industry as a whole.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Parkev Tatevosian owns shares of Alphabet (C shares) and Walt Disney. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.

Stocks Mentioned

Walt Disney Stock Quote
Walt Disney
DIS
$99.43 (0.85%) $0.84
Netflix Stock Quote
Netflix
NFLX
$320.41 (1.09%) $3.46
Meta Platforms Stock Quote
Meta Platforms
META
$123.49 (2.53%) $3.05
Alphabet Stock Quote
Alphabet
GOOGL
$100.44 (-0.55%) $0.55
Nielsen Plc Stock Quote
Nielsen Plc
NLSN
Alphabet Stock Quote
Alphabet
GOOG
$100.83 (-0.44%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.