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Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix'

by foepys 9y ago

Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix' own productions don't take off as much as they want.

adventured 9y ago
It's very doubtful that Disney is or could be an serious issue for Netflix now. Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all. Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion. Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group). At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years). Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house). Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.
- dwighttk 9y ago
  I don't know how much business 21st Century Fox does compared to your numbers, but Disney is buying "most of" them[1] http://money.cnn.com/2017/12/14/media/disney-fox-deal/index.html http://money.cnn.com/2017/12/14/media/disney-fox-deal/index....
  - adventured 9y ago
    If the acquisition goes well, it could keep Disney ahead of Netflix's scale for another three or four years (on an apples to apples basis). The Fox assets they're acquiring are substantial, however there's zero organic growth in the Fox business (it's closer to a contracting business with 2017 sales below 2015 sales). An acquisition like that might be as likely to throw Disney into chaos as anything and give Netflix a leg up on stealing market share, given the corporate history of very large acquisitions. That also of course depends on what the Netflix growth profile looks like over time as well. For example, does Netflix routinely still generate 15%-20% annual growth after they're up over $20 billion in sales? If so, there's nothing Disney can do to stay with them short of continuing to buy up the rest of the entertainment universe. The global subscriber momentum Netflix has now is incredible. By the time Disney figures out exactly how all of their streaming pieces are going to fit together, Netflix might be up to 250 million global subscribers.
    - dwighttk 9y ago
      Is there a sizable precedent for companies hitting $20 billion in sales and continuing to routinely generate 15-20% growth?
- exclusiv 9y ago
  Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place. > Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. For share of streaming wallet yes; but they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition. Also - Netflix has the US mostly saturated so they have to create or sign content for the various international markets. While Disney already has great content with global appeal.
madshiva 9y ago
Don't care about Disney, if Disney do this fine. Nobody should watch these animation movie, and especially kids. If one day I had a Kid, I would block them from watching this shit.

by foepys 9y ago

adventured 9y ago

It's very doubtful that Disney is or could be an serious issue for Netflix now. Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all. Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion. Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group). At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years). Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house). Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.

dwighttk 9y ago
I don't know how much business 21st Century Fox does compared to your numbers, but Disney is buying "most of" them[1] http://money.cnn.com/2017/12/14/media/disney-fox-deal/index.html http://money.cnn.com/2017/12/14/media/disney-fox-deal/index....
- adventured 9y ago
  If the acquisition goes well, it could keep Disney ahead of Netflix's scale for another three or four years (on an apples to apples basis). The Fox assets they're acquiring are substantial, however there's zero organic growth in the Fox business (it's closer to a contracting business with 2017 sales below 2015 sales). An acquisition like that might be as likely to throw Disney into chaos as anything and give Netflix a leg up on stealing market share, given the corporate history of very large acquisitions. That also of course depends on what the Netflix growth profile looks like over time as well. For example, does Netflix routinely still generate 15%-20% annual growth after they're up over $20 billion in sales? If so, there's nothing Disney can do to stay with them short of continuing to buy up the rest of the entertainment universe. The global subscriber momentum Netflix has now is incredible. By the time Disney figures out exactly how all of their streaming pieces are going to fit together, Netflix might be up to 250 million global subscribers.
  - dwighttk 9y ago
    Is there a sizable precedent for companies hitting $20 billion in sales and continuing to routinely generate 15-20% growth?
exclusiv 9y ago
Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place. > Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. For share of streaming wallet yes; but they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition. Also - Netflix has the US mostly saturated so they have to create or sign content for the various international markets. While Disney already has great content with global appeal.

madshiva 9y ago

Don't care about Disney, if Disney do this fine. Nobody should watch these animation movie, and especially kids. If one day I had a Kid, I would block them from watching this shit.