Disney unveiled a new video-streaming service: Disney+, defying the odds against Netflix and other streaming services. It will be available from November 12 so consumers have enough time to make a choice, and investors — to scrutinize this strategy.
Disney stock surged as much as 12% on Friday, reaching an all-time high, while Netflix tumbled 4.5% on concerns that its competitor’s cheaper service may disrupt Netflix’s dominant position.
Disney announced a relatively low price of $6.99 a month, compared to Netflix’s subscription, which is $12.99 a month.
Disney set a goal to have from 60 million to 90 million subscribers by 2024. Netflix currently has about 150 million subscribed households around the world and heavily invests in content. Analysts expect that Netflix will spend about $15 billion on programming during 2019, while Disney announced that it will invest $1 billion on original series for its Disney+ service over the next two years.
While there is enough room for both companies to coexist in the market, Disney’s investment strategy is unlikely to allow it to grab a solid market share. However, it may become a must-have family app, as children can be a target audience who don’t mind watching old movies over and over again.
Though deep-pocketed, Disney is not considered a serious threat there are two possible strategies for Netflix. The leading streaming service may rethink its pricing strategy and entice new clients with a lower subscription. Alternatively, another way to keep and expand market share is to invest in content even more aggressively, adding concerns to investors’ biggest pain —Netflix’s cash outflow, which is expected to reach $3 billion in 2019, similar to that in 2018.