Disney Plus announcement causes Netflix stock to drop

After months of hype, the Walt Disney Corporation finally revealed pricing and contact details for its forthcoming Disney Plus app. The subscription video on demand (SVOD) service will launch with movies and TV shows from the Disney Animation, Marvel, Lucasfilm, and 20th Century Fox brands. Moreover, the platform will be available for $6.99 a month or $69.99 a year starting on Nov. 11, 2019.

The firm’s long-awaited announcement has intrigued consumers and impressed market analysts. Consequently, the studio’s stock price rose by 10 percent following its April 10 unveiling of Disney Plus.

However, the conglomerate’s reveal had a decidedly negative impact on one of its biggest rivals in the SVOD space.

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Netflix’s stock price dipped by four percent directly following the House of Mouse’s big declaration. In other words, the product reveal cost the streaming giant a loss of $7 billion in market value.

Why the Disney Plus Announcement Hurt Netflix

On the surface, it may seem odd that the Disney Plus announcement hit Netflix so hard. Indeed, it’s unknown how many people will subscribe to the platform at launch and how stable its streaming will be. Conversely, Netflix has 58 million subscribers in the U.S. alone and is more popular than broadcast television among Millennial consumers.

In truth, Netflix saw its value fall because Disney Plus looks like the first serious rival the Los Gatos, California-based company has had in quite some time. For one thing, Disney is coming to the table with a lot of highly desirable content.

At launch, the service will host the entire “Star Wars” film saga, a slew of classic Disney and Pixar films, select Marvel Cinematic Universe movies, and all 30 seasons of “The Simpsons.” However, the streaming service isn’t just a hub for beloved old content. The studio has confirmed the platform will debut 25 original series and 10 original films in its first year.

Notably, the family entertainment giant is taking a walled garden approach to its media. Once Disney Plus goes live, it will be the exclusive home to Disney, Marvel, Fox, and “Star Wars,” movies and films that are currently hosted by services like Netflix.

With all that attractive new and old content, Disney will give Netflix a real run for its money. Especially since the studio’s platform costs $2 less than Netflix’s least expensive package.

The Other Shoe Drops

Though quite appealing, Disney Plus suffers in comparison to Netflix in one significant regard. As of 2018, the streaming video leader hosted 4,010 movies and 1,569 TV series. Moreover, Netflix’s ever-growing library contains a wealth of R-rated content, meaning it offers greater selection and greater variety. However, the studio is aware of this issue and seems to have a plan in place to address it.

At the beginning of this year, Disney owned a piece of SVOD service Hulu alongside Fox, Comcast, and AT&T. With its March acquisition of Fox, the House of Mouse owned 60 percent of Hulu. On April 15, AT&T announced it sold its 9.5 percent share of Hulu to Disney. Additionally, it’s rumored the entertainment brand will buy out Comcast in the near future.

Thanks to its careful acquisitions, the corporation now has three broadly appealing streaming services in its portfolio: Disney Plus, Hulu, and ESPN Plus. Kevin Mayer, Disney’s international chairman, told Business Insider the company “will likely” offer all three services at a discount.

If the media giant unveils an affordable three service bundle later this year, Netflix’s stock is going to fall a lot further than 2 percent.

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