When Netflix (NFLX) – Get a free report began its shift from sending DVDs to offering streaming video, it had something no competitor offered. You can watch an array of movies and TV shows on demand. This was something that was previously only possible if you purchased a movie or TV series on DVD (or VHS).
The service at the time was revolutionary. Previously, TV shows aired in reruns, but on a limited schedule. If you wanted to watch “Friends” or “Cheers,” you were at the mercy of which channel had the syndication rights to that show, and for greatest hits, you could also get another set of shows scheduled on a cable channel like TBS.
At some point, the streaming company realized that as other companies entered streaming, the price and competition for archival content would increase (or that studios would want to keep shows for their own services). That’s when Netflix turned to creating its own original content, a move that has led to the company having some big hits it actually owns.
Now Netflix is in trouble, at least compared to its past success and instead of focusing on its content to drive subscriptions, the company has made another move that for some reason rival Walt Disney decided to follow.
Disney and Netflix confuse value and price
Disney has a massive archive of content that it owns. This is a major advantage over Netflix which has relied on licensed shows and creating originals from scratch, whereas Disney can base its shows on Marvel and Star Wars characters.
And while both companies sell subscriptions, they don’t seem to realize that value is relative. This makes for a very curious move, Disney and Netflix have decided to offer a discounted version of their streaming service with ad support.
Disney CEO Bob Chapek spoke about the service during his company’s fourth quarter earnings call.
“We are exactly one month away from the US launch of Disney+’s ad-supported subscription offering, which is a win for the public, advertisers and shareholders. The launch will give fans a fresh slate of entertainment plans. subscription across Disney+, Hulu, ESPN+ and the Disney Bundle, giving viewers the flexibility to choose an option that suits their needs,” he said.
In theory, cheaper prices mean more people can subscribe, but that’s the opposite of how premium products generally work. Disney doesn’t price its theme parks so the most people can go, it sets them so they make the most money.
Netflix and Disney+ are premium services – the iPhones or Teslas of the streaming space – so offering them for less actually reduces their value.
Netflix has a content problem (Disney doesn’t)
Netflix has stumbled when it comes to making hit shows, so you can probably argue that it’s not as premium a service as it once was. If the goal is to be more mainstream and less HBO at its peak offering premium content at a premium price, then perhaps a cheaper ad-supported tier makes sense.
Disney, however, has no content issues. It can leverage its intellectual property (IP) for a seemingly endless slew of new shows that will delight fans. “Ms Marvel” might not be as popular as “The Falcon and the Winter Solider,” but it’s still a show more Marvel fans have watched. The same could be said of “Andor” versus “Obi-Wan Kenobi”.
With these shows, Disney is giving subscribers a theatrical experience at least once a week, along with an incredible archive. It’s hard to argue that its Disney and Marvel shows aren’t big screen quality and the company should position its offering as the ultimate premium product.
Netflix may not be worth its subscription price due to its lack of current hit shows. Disney+, however, would be good value at twice its current price at least for fans of its biggest franchises (which have the deepest fanbases of any IP in the world).
Chapek seems to understand the value of the Disney+ platform, but he clearly doesn’t see its true value to customers.
“As we celebrate the third anniversary of Disney+ this week, I can’t help but reflect on how our commitment and substantial investment in our DTC business has helped create the most powerful suite of streaming services in the world. world with the ability to reach hundreds of millions of viewers around the world with must-see content, services that are not just content delivery systems, but platforms that bring us closer than ever to audiences and provide consumers with access to more of The Walt Disney Company’s total offering,” he said.
If Disney (or Netflix) has can’t-miss shows — something we know Disney can deliver in perpetuity — then price doesn’t matter. Apple doesn’t discount its iPhones and Tesla won’t put its mark on a low-cost car. Under Armor nearly ruined its brand by slashing its core products, which undermined the company’s premium brand proposition. This is something Lululemon never does because people will pay for quality as long as it also comes with better perception.
Disney has the premium brand with shows people really want to see. High-end products cost more, not less, and Disney lowering its prices risks reducing its perceived value.
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