It's a case of 'Netflix and chill' as Apple and Disney set out their digital content platform plans

Profile picture for user slauchlan By Stuart Lauchlan April 16, 2019
Rivals are circling, but Reed Hastings wants everyone to just 'Netflix and chill'.

Did Netflix just significantly blink in the face of oncoming competition in the streaming content platform wars?

Until now, the firm has been notoriously reticent when it comes to revealing the ratings for its shows, something that the likes of the BBC have picked up on when being told by commentators that their days as broadcasters are numbered.

But the firm has now decided that it’s time to be more transparent and will now publish a Top Ten list of its most watched programmes each month, beginning with a trial in the UK. A decision on whether to extend this to other countries will follow.

Meanwhile Netflix is bigging up some of its more recent successes, with The Umbrella Academy cited as racking up an astonishing 45 million viewers in its first month of release, while Sex Education, the comedy starring Gillian Anderson, clocked up 40 million in its opening month in January.

Those are numbers that the BBC these days can only dream of. But more importantly, they’re going to lay down a metric against which to measure the oncoming storm that is the entry of Disney and Apple to the Netflix arena.

Disney’s ongoing plans for dominance - including taking back all of its properties, including the Marvel catalog and the Star Wars empire, from Netflix - have been well-documented. The firm last week drilled down into more detail of Disney +, with a 12 November US launch date announced as well as pricing of $6.99 a month - considerably below Netflix current banding.

As well as its extensive back catalog, the company intends to offer 35 original series, including Star Wars spin-off The Mandalorian, and ten original movies in its first 12 months. By its fifth year of operation, the ambition is to scale up to more than 50 original series.

Meanwhile last month Apple announced Apple TV Plus, its own streaming content service delivered via the Apple TV app, which will now be available on third party devices and smart TVs as well as the firm’s own products. The Apple venture will include original content from big-hitters including Oprah Winfrey, Steven Spielberg and J.J Abrams.

Dumbo in room

So, bad news for Netflix all round? Inevitably the party line at present is to keep calm and carry on. So as the firm announced it has added 9.6 million subscribers to hit 148.9 million users worldwide, it took the sensible decision to confront the Dumbo in the room head on in a letter to investors:

We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on-demand entertainment is so massive and because of the differing nature of our content offerings. We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing (similar to how US cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s).

The message is simple - the market is big enough for more competitors to come in, even if they are titans like Disney and Apple. It was a theme picked up by CEO Reed Hastings:

Great competition makes you better and so we're thrilled to have Apple and Disney in. They are awesome companies and just to be in the same league as them is very exciting for us. On a practical basis, there's already so much competition. I mean…we only win 2% of downloading on mobile. It’s like 98% of the time people are not doing Netflix. On US television, it’s 90% are not watching Netflix, so there's a ton of competition out there and Disney and Apple add a little bit more, but frankly I doubt it will be material, because again there's already so many competitors for entertainment time, which is great for consumers and it's exciting for us.

Where Netflix is going to retain an advantage - for the short term - is in terms of its global availability. Apple’s service is due to launch in the Fall in the US, but to date there’s been little information about international delivery. Meanwhile Disney fans in Western Europe will be waiting until the first half of 2023 before they can sign up for Disney +.

The ability to address local markets and deliver international content is something that Chief Content Officer Ted Sarandos is keen to emphasise:

We've kept one strict principle around it, which was that these shows have to be very locally relevant and to do that, you have to be pretty authentically local. So, what we're trying not to do is try to in-authentically make a global show, because basically that doesn't work for anybody. So the more authentically local the show is, the better it travels, which we've seen with Kingdom. So fans of K-Drama around the world loved that show and it resonated incredibly well for us in Korea. Similarly, coming up, we have a new season of The Rain coming out this quarter, that is perfectly Swedish. We don't try to moderate down or make it travel any better inorganically and it found that the best way to make global stories is to make them incredibly authentically local.

He cites India as a good case in point:

We were super encouraged out of the gate with Love Per Square Foot and Sacred Games, where not only do we get a lot of viewing in India, but it just took an incredible position in the zeitgeist where people were talking about and writing about the excitement of a show of the quality of Sacred Games. And then recently we followed it up again with Delhi Crime that people are also really loving it in India and is getting watched outside of India as well. Most importantly, the steady drumbeat and then add to that another dozen original films coming in India that we're seeing the investment in local language content in India payback in the form of excitement and member growth and hours growth that's encouraging us to keep going.


Sarandos also pitches the line that the loss of properties, such as the Disney portfolio, is something that has been planned for and that even as Disney and Apple now intend to offer fresh ‘second windows’ for content producers and broadcasters, this has been factored into Netflix strategy:

The thing to keep in mind is, this is seven years ago when we thought it was likely that the studios and networks would like to keep their second windows for themselves over time, then we better start getting good at creating our own programming and getting in business with creators who could do that for us and with us. And that's what we set out to do. And over every year, our percentage of spend, our percentage of hours watched have continued to grow toward our own original and branded shows on Netflix and films. We’re trying to do that across all the things that people love, scripted series, unscripted series, feature films, documentaries, standup comedy, great kids programming.

He adds:

In the entire history of television, there are lots and lots of hours of programming that people watch fairly interchangeably, but the shows that our members most value us for and the things that we really pay a lot of attention to, if you look at our top 10 most watched shows on Netflix, they're all Netflix Original brands…So increasingly, our business is about creating and telling great stories around the world that are exclusively on Netflix and giving opportunity for new storytellers all over the world.

My take

Despite all the buzz, 2019 is going to be the year of the phoney war in the streaming media providers industry. Disney and Apple will launch towards the end of the year in the US. For Apple, it’s part of a wider shift towards a services-based model to balance out falling iPhone sales, so there’s more pressure on the firm to make a success of this as quickly as possible. Disney’s approaching this new market with the too big to failconfidence of a company that knows it already possesses a fistful of trump cards in terms of brands and existing content.

Netflix management is entirely correct to maintain its confident front in the face of this incoming competition, although whether such sang-froid will still be in place a year from now is another matter. Wall Street’s demonstrated its jitters before and any sign of subscriber drift in the direction of Mickey Mouse or Tim Cook is unlikely to go unpunished. In media circles, it’s always been the case that content is king. That’s a mantra that’s about to be put to the test in the digital streaming media sector.