In the mid-2000s, Netflix permanently changed how movies and TV shows are consumed in America. By offering consumers instant access to thousands of titles, the streaming service made video store chains irrelevant (see ya, Blockbuster). As high-speed internet became accessible, the firm came to displace broadcast television as the nation’s premier media distributor. However, a significant legacy entertainment brand is challenging the corporation’s market dominance.
On May 14, it was announced Disney assumed total control of the Hulu streaming platform. Though Comcast still retains ownership of 33 percent of the service, the company made a buyout agreement with Disney. The cable TV firm gets to keep streaming its shows exclusively on Hulu until 2024. That year, it will have the option to force Disney to buy out its stake for no less than $27.5 billion.
Consequently, the House of Mouse now operates three distinct streaming services that offer three different kinds of content to consumers. Meanwhile, Netflix is struggling to compete in a highly competitive subscription video on demand (SVOD) landscape.
Why Disney now has Three Streaming Video Services
One of the reasons Netflix became so popular so fast is that it offered something for everyone. Like the video stores it supplanted, its library included movies and TV shows from a wide range of genres, eras, and brands. For a while, the major Hollywood studios were content to receive millions in licensing fees from the digital content distributor.
Earlier this decade, however, media production companies realized they could make more money by bringing their content directly to consumers. Consequently, networks like CBS, HBO, and the BBC launched their boutique streaming services. But because those niche apps didn’t have the variety Netflix has, they couldn’t touch Big Red’s 100 million+ subscriber count.
Now, Disney has emerged as a real Netflix rival. Ironically, the House of Mouse has succeeded by adopting and improving upon its chief competitor’s content strategy. First, it appealed to sports fans with its ESPN+ streaming service. Last month, it unveiled its Disney+ platform to serve lovers of Pixar, Lucasfilm, Fox, Marvel, and Walt Disney Studios media.
However, as the Disney brand is targeted toward children and families, it needed another portal to distribute its adult-oriented media.
As it happens, Hulu is precisely what the corporation needs to complete its streaming content triangle. Founded in 2007, it has long served as an aggregator for Fox, NBC, and ABC TV shows. By buying Fox earlier this year and negotiating NBC parent Comcast’s exit this week, Disney is free to overhaul Hulu. For instance, Disney can now use it to host mature viewers media it owns through its 20th Century Fox and ABC Studios subsidiaries.
Plus, as opposed to Netflix, Disney gets to charge consumers three different monthly subscription fees to access all of its content.
Why Netflix is Struggling
Last month, Netflix noted it grossed $4.52 billion in revenue in Q1 2019. Furthermore, the corporation announced that it added 9.6 million domestic and international subscribers to its platform during the same period. However, its quarterly earnings report was not all good news; the company revealed its Q1 cash flow was -$380 million, an increase of almost-$100 million since Q1 2018.
The streaming service’s financials are in disarray because it’s negotiating a major brand overhaul. For its first decade, Netflix was a distributor for other companies’ video content. However, beginning in the 2010s, the corporation has worked to establish itself as a producer of original media. While the platform now hosts more original than licensed TV shows and movies, it still depends on third-party shows to keep its subscribers happy.
Late last year, Netflix spent $100 million to keep “Friends” in its streaming library through 2019. However, as “Friends” licenser WarnerMedia will be launching its streaming service soon that deal is unlikely to be renewed. Similarly, Warner Bros. will probably pull “The Office,” “Brooklyn Nine-Nine,” and “Supernatural” from Netflix to make its SVOD app more appealing.
Netflix is also going to lose its CW content shortly. In 2011, CBS and Warner Bros. made a deal with the popular service to bring greater expose its under-seen programming. However, as shows like “Arrow,” “The Flash,” and “Riverdale” have attracted sizable audiences, The CW can now demand top dollar for its content.
Meanwhile, Netflix has lost some relevancy after wrapping up award-winning hits like “House of Cards” and “Orange Is the New Black” and ending its Marvel Defenders franchise. The corporation is now struggling with the same fate of all disruptors; being out-innovated by a rival organization.