One streaming newcomer has gained nearly 30 million subscribers in just months, so should Netflix investors be anxious?
Content streaming platforms are being utilized more and more as many of us are forced to stay indoors and pass time while the coronavirus pandemic runs its course. Walt Disney Co’s (NYSE: DIS) new entertainment hub Disney+ has had a huge amount of new subscribers, jumping to 50 million in just weeks. Only two months ago the company had 22 million subscriptions — it just goes to show what we are all doing with our spare time.
Should Netflix Be Worried About This?
Netflix (NASDAQ: NFLX) is a household name and the first brand many think of when it comes to streaming. Since the COVID-19 outbreak, the company lowered its streaming quality across Europe as worries peaked that it may ‘break the internet’. Other big names in the streaming business like Youtube (NASDAQ: GOOG) and Disney then followed in Netflix’s footsteps and did the same.
While Disney has had a quick rise in its subscribers in a short amount of time, it doesn’t yet compare to Netflix’s 174 million. While there is no need to worry just yet, Netflix might be on edge in 2021 when Hulu, Disney’s other streaming platform, expands its services beyond the United States. Hulu is close behind Disney+ with 30 million subscribers, an impressive figure considering it hasn’t yet gone international.
Another competitor is Amazon Prime (NASDAQ: AMZN). The streaming platform boasts 150 million subscribers across the globe, but it is hard to know exactly how many people are streaming from the blanket service. Another platform on the radar is Apple TV (NASDAQ: AAPL) which now has over 33 million subscriptions after launching in November 2019. However, the main reason the numbers are so high in such a short amount of time is that they offered free subscriptions with every iOS purchase.
Will Disney Need More Than Subscriptions To Compete?
There was some bad news for the Disney stock, with Netflix surpassing its worth for just the second time ever as its stock hit an all-time high on Wednesday, April 15, 2020.
While many people might be turning to their screens to watch shows on Disney +, the coronavirus has had massive impacts on other parts of the company. Disney was forced to close down its theme parks in the U.S, Europe, and Asia which is estimated to cost the business over $500 million. It has also halted the production of live-action movies and its cruise business. To make matters worse, the purchase of 21st Century Fox more than doubled Disney’s debt to $48 billion.
At the moment, Disney really needs all the new subscriptions it can get while many other areas of its business remain uncertain. Disney+ is not yet making the company huge amounts of money with annual revenue estimated at around $3.3 billion. In fiscal 2019, Disney made $69.6 billion and the big money makers were media segments and theme parks, hotels, etc. There is every possibility Disney+ could provide a huge chunk of revenue in the future, but the service isn’t expected to turn a profit until 2024.
Should Netflix Investors Be Worried?
The streaming giant has beaten the market by more than 20% so far this year, and at its last earnings report for its fourth quarter, the company revealed its strong original programs were the key to drawing viewers to its service.
Much more will be known when the company posts its earnings report on April 21, but Netflix is predicted to make $5.73 billion in revenue, which would be an increase of 27% on last year.
I don’t think Netflix investors need to worry about its competition. It’s the perfect storm at the moment for the company which is attracting views from people stuck at home. Netflix still remains King, just like Joe Exotic, and is a solid investment to keep.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Disney and Netflix. Read our full disclosure policy here.