Disney’s New Streaming Service Will Soon Destroy the Competition

Disney’s New Streaming Service Will Soon Destroy the Competition

We talk about the rise of Netflix, Amazon’s streaming service, Hulu and even YouTube but I don’t think we’ve discussed enough of the impact Disney’s new streaming service is going to have.

Yes, Disney is Developing its Own Streaming Service

If you didn’t know, Disney is developing its own streaming service that’s looking to be priced substantially below Netflix at its launch. They have been leaking bits and pieces about their new streaming service here and there so we only know a little, but I don’t think people realize how big of news this is.

Cable TV is Dying, Streaming is the New Thing

In 2015, Netflix and Hulu grew 29% to a $5.1 billion market cap while cable and satellite tv only grew by 3%. It’s safe to say that streaming is taking over. Netflix alone has 109.3 million subscribers and anticipates another 6.3 million subscriptions this quarter. Those 109.3 million people are paying $10.99/month. That’s $1,202,300,000 per month. Not bad.

With Streaming, Content is King

Netflix realized a while ago, that anyone can get copy rights to movies and tv shows to be a streaming service, but what makes you unique is the original content you produce. That’s content you exclusively control. Think “House of Cards” you can’t get that anywhere except Netflix. Those original shows draw crowds of people to Netflix and they stay for the wide range of shows to watch. So much so that most people don’t need cable anymore other than sports, which have started streaming as well.

If you’re curious to know how serious original content is Netflix. Netflix plans to spend $8 billion on original content in 2018.

No One Has More Content Than Disney

Nearly every childhood movie (Lion King, Aladdin, 101 Dalmatians, etc.) is owned by Disney. Now add onto those the Pixar movies (Toy Story, Finding Nemo, Cars), Marvel Studios (Iron Man, Captain America, Thor, Avengers, etc.) as well as Lucas Films (Star Wars). These are just a taste of the original content has, and can start streaming on their own network when ready. They own the exclusive rights to these films that can be leveraged in their new streaming service.

These are huge name franchises here! The Marvel Films alone have averaged $840 million at the global box office per movie.

Then you also need to consider all the Disney channel content and shows that it’s created for tv, soon going to be available in one location. I wouldn’t be surprised to see the Disney Streaming service being the one streaming service owned by every mom in America.

Here’s a taste of the Disney Vault of movies.

Now start to consider what if Disney started to produce new content, including Star Wars, Marvel and/or movies exclusively for their new streaming service. That will be a huge draw to the service!

As much as Netflix, Hulu, Amazon Video and YouTube can crank out content. Disney has a winning formula it’s used for years to amass loads of quality content and proven itself over and over. It WILL win the original content game. If Disney can continue to dominate the original content game, they will win the streaming game.

When Does Disney’s Streaming Service Start?

The only thing we know is that Disney plans to debut their streaming service in 2019. Coincidently, this is when their current contract with Netflix is through. So when Netflix loses all their Disney content (think Marvel Series like Jessica Jones, Luke Cage, Daredevil, etc plus other Disney content), Disney will likely publish these shows on their own streaming service.

Keep in mind, they’ll start their ESPN streaming service in 2018 to start catching those cable-cutters who love sports. This will give them an opportunity to help hash out all the bugs for their larger digital content streaming service.

Will This Impact the Streaming Industry?

To give you an idea of the impact the news about a Disney streaming service. When Disney made the announcement, Netflix stock price dropped 4%.

Plus Disney has the resources not only from its box office hits, but it’s depths of resources to undercut all these other streaming services in price. So while Netfilx will continue to raise it’s monthly subscription price to pay for their original content, Disney win the war on prices and simply choke Netflix out. We’ll likely see Amazon Video and Disney as the lasting champions in the streaming game.

Conclusion

I am going to try to pick up a few more shares of Disney while the price is low before 2019. It’s not the greatest dividend for my dividend strategy at a 1.51% dividend, but it’s a great company with a great plan to be the #1 player in streaming services.

If you liked this article, I’d love if you shared it! =)

Andrew
AndrewWallet Squirrel Found and Finance Ninja
8 replies
  1. Tom @ Dividends Diversify
    Tom @ Dividends Diversify says:

    I always find these disruptive technologies and their impact on business interesting, but I haven’t cut the cable yet. Understand your dilemma with your dividend stock investment strategy. Sometimes there are businesses you want to own even if they don’t pay a big enough dividend to attract us as we hunt for yield. I haven’t looked at Disney in a while. Do they increase their dividend on an annual basis? Consistent dividend growth can be a good pacifier to give up on a higher yield.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Hey Tom!

      I’m totally a cord cutter. I only pay for internet, Amazon Prime (includes Amazon Video) and Netflix. Those combined give me TONS of content to watch while still being cheaper than cable. I see this the trend moving forward, but miss my sports. =(

      Disney has raised the dividend since 2007 (https://seekingalpha.com/article/4079437-disney-dividend-growth-stock) but I’d still view it as a growth stock with a dividend. On the plus side, they have TONS of room for growth with their dividend. =)

      Thanks for commenting!
      -Andrew

      Reply
  2. Steveark
    Steveark says:

    Great post. I think they will be a dominant force but there is far too much content, especially the Netflix, Hulu and Amazon original content as well as HBO to allow one company to crush the others. Just like the old cable TV model had room for hundreds of cable channels the new streaming model will have a lot of players. But even though I won’t, because I won’t buy individual stocks, I know I’m going to kick myself in a few years because this smart guy (you) tried to tell me it was going to shoot up like a missile and I didn’t buy any.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Hey Steveark,

      I totally get that. I agree that the other players will be producing great content regularly and it could easily get back to the ways cable companies competed with each other. I’m thinking that Disney already has a vault of original content that will give them a running start, and their content is already a huge draw, they’ll be a powerhouse.

      Even if you don’t buy Disney now, we won’t be seeing Disney stock price change overnight. They are a HUGE entertainment machine, the streaming business will just be another drop in the already big bucket. =)
      -Andrew

      Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      SO TRUE! Parents buy these movies to inspire/keep their kids busy. Then later the kids buy the movies to be nostalgic to their youth and their kids. Disney is a content machine!

      Thanks for commenting!
      -Andrew

      Reply
  3. Dividend Diplomats
    Dividend Diplomats says:

    Wallet –

    Very solid article and a good spin on a way to look at Disney as a continued success to come. I believe families of all ages will consider this, especially with the ESPN option. Further, streaming is now & tomorrow, with less and less focus on cable packages – more and more companies will have their own “line” of streaming service. It’s incredible and makes me curious of what the entertainment landscape will look like in 3-5 years. WWE did this with their wrestling subscription a few years ago and believe they’ve been successful with their streaming service. From a dividend standpoint – they are paving the way to allow for significant future increases ahead : )

    -Lanny

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Hey DD (Lanny)!

      It’s really interesting to see where streaming goes in the future. I definitely see more and more companies entering the streaming space. Especially dying cable companies and networks. I think the biggest draw to each of these streaming services is unique content and I see Disney being the champion in new/original content. =)

      So I’m loving Disney’s low stock price currently,
      Andrew

      Reply

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