Read Part 1 here
Netflix vs Disney
(Netflix vs Other Streaming Platforms)
By now, you’ve heard that Disney is planning to actively compete with Netflix in the streaming arena. I have no doubt that the content on Disney+ will be stellar. However, something about the attitude with which Disney is going about it has me worried. I get the impression that Disney is gloating about their service focusing on quality rather quantity. Maybe it’s just me.
I find myself somewhat disagreeing with some experts that are counting Netflix out, especially those who think the reason for Netflix’s demise will be Disney+. I have already explained (at least tried to) how sheer quantity can help a streaming service but I haven’t explained how a lack of quantity can hurt.
With the streaming model, you need more titles with narrow appeal than less titles with wide appeal. Subscribers can watch your awesome show only so many times before they want to see something else. If you only have premium content on your platform, if people feel like your choice offerings are numerable, if they are not overwhelmed by the sheer number, they will mark your stuff as the little bit of content that they will come back to eventually, maybe via other platforms such as television, DVDs, borrowing from the library, or worse, piracy.
If quality was truly a Netflix-killer, HBO would have killed Netflix by now…
…and Netflix would have killed YouTube. Lord help you if you’re charging a premium for your service. I said in an earlier part of this series that a nuclear family “essentially pays the price of one ticket…only once a month!”. That wasn’t entirely accurate. For the sake of rounding, if a movie ticket costs 10 bucks, a nuclear family pays a quarter of that every month for Netflix. This is because Netflix allows up to four devices at any given time. This base $2.50 a month price is what we have to see it as. This is the baseline that Disney will have to compete with. Disney’s competition, in this case, is not Netflix. It’s Convenience (with a capital “C”). Essentially, there’s a new generation of homo sapiens out there. They believe they can watch almost anything they like for a range starting from free to $2.50 a month and no more. That is the place that technology has taken mankind and it will be nigh impossible to dial things back without an executive order from a popular president.
Internet service providers and big cellular companies have been able to keep the status quo of charging a premium for a baseline commodity, thanks to powerful lobbying and things like the reversing of net neutrality laws.
I will digress a little and point out that apart from using the government to keep the status quo against technological progress (technology always wins in the end mind you), these companies have figured out how to work together as an oligopoly. To the average person, it looks like they’re competing against each other…but in reality, it’s just a Mexican standoff. They have unwritten agreements among themselves on how much to charge and where to mark their territories. They operate in fellowship and create industry standards for the government to ratify in such a way as to increase the barriers to entry for upstarts.
I made that digression just to buttress my earlier point about these movie studios needing to find better ways to work together and share risks. We need more collaborations like Tom Holland’s Spider-Man. In that spirit, I think Disney needs to collaborate with Netflix (I hope to get to this somewhere down the line, but back to the competition).
If Disney is going to compete with Netflix, annexing Hulu is not going to be enough. They have to voraciously be scouting for new content from every nook and cranny of the earth. Er, no, Disney, those Star Wars and Bucky-Falcon-bromance series are not enough to make people cancel their Netflix subscriptions…even if nary a single Marvel or Disney show/movie is ever seen there again. Netflix is buying movies all the way from Nollywood (Nigeria’s Hollywood). That’s how far Disney will have to reach to really be in contention. Otherwise, they’ll just be priding themselves as content creators rather than curators of a vast untapped entertainment space.
The only streaming platform that I see as a current threat to Netflix is Amazon. They have the lock on the “we have everything” branding…and there’s no escaping it. They also offer even bigger bundling than Netflix. Netflix allows 4 ‘families’ to share a subscription. Amazon gives you free shipping and introductory access to many many perks with the same Prime subscription. Amazon, in particular, still has nowhere to go but up for now.
I pray that I’m being absolutely clueless about Disney’s foray into this sector. I pray they’ve really figured out how to ‘pimp’ the streaming industry and are not simply getting into the game out of some hubris and/or opportunistic competition. Blockbuster didn’t get into the streaming game too late. They got into the game for the wrong reason and with the wrong mindset. Netflix was created as a solution to the problems caused by the Blockbusters of this world…problems such as inconvenience. Instead of Blockbuster addressing that inconvenience head on, they simply tried to create another ‘Netflix’ to compete with Netflix. They assumed Netflix was also in the DVD rentals business.
Netflix is not an entertainment company. They are a logistics company. They have figured out the best channel for getting entertainment from A to B. Amazon is a logistics company. They’re not a bookshop or widget manufacturer even though they sell a lot of books and they have their branding on a lot of widgets. Such logistics is the paradigm of today’s age and any company not operating this way risks eventual oblivion.
The old paradigm involved building a better mousetrap, hiring people to make some noise and then hoping people would beat a path to your door (and hopefully keep coming back if you smiled well-enough at them or gave them free WiFi or something). The new paradigm requires figuring out those who have mice and ensuring the mousetrap is already waiting at their front door when they get home.
If Disney has figured out a way to improve on information gathering, algorithms and distribution logistics, then good on them. However, if they’re still thumbing their nose at how new to the entertainment game Netflix is, then they’ve missed the mark. If they’re depending solely on their ability to produce premium content, then they might as well pack it up and make amends with Netflix as their distributor (or go with Amazon if they’re too proud to go back to Netflix).
This same complaint applies to the cinemas. If your business is still charging “convenience fees” to those who skip lines and pay online, there’s a strong chance your business is outdated.
You hear that folks? If your business has not optimized logistics, if your business still has bottlenecks, red-tape, and long waiting lines, you’d better be working for the government (or hiding behind government’s skirt). Otherwise, “all your base are belong to” Amazon!
Every Tom Dick and Harry will eventually decide that they can stream. Eventually, Instagram will have their own streaming service, maybe also Gillette…et tu Kaiser Permanente? Heck, even I could decide to stream my ‘premium’ content from YouTube. Anybody can stream!
No individual platform will be so good as to make all the rest combined redundant.
This brings me to another prediction. All streaming platforms will eventually come together. Possibly, a combination of two platforms (my bet is on Netflix and Amazon) could dominate the space while the others languish as pricey niche products…
…or they could all come together to create an all-access pass of sorts. Nobody is going to pay $10 each to 20 different services. They may pay $50 or even less to access every single platform (every single last one!)…
…or all platforms may simply decide that the algorithms and AI that make these services possible are now commonplace enough to be provided by some ‘neutral’ party (cough Google cough) so everyone can go on to focus on making good content.
Netflix foresaw this move to streaming by Disney and Co. early on. They shifted their focus from merely being a conduit (like Blockbuster) to being an actual curator of content (and convenience). Disney has to figure out how to narrow the immense head-start Netflix has…and I have no doubt that they can do it if they have the right mindset. If it so happens that Disney has the wrong mindset, my advice is they should stick to making the awesome movies and let someone else target audiences for them. Partner, collaborate or…ugh…create a Mexican standoff if they must.
If Disney really insists on competing with Netflix, they should buy Netflix.
To be concluded.
Artist who loves spreadsheets.