Netflix vs Disney: A Year of Warfare Likely Will Escalate In 2019
ABC exec Channing Dungey’s move to the streamer signals a new front in Reed Hastings’ battle with Bob Iger in the run-up to the Mouse House digital competitor’s debut next year.
It's been a year of trench warfare in the battle for talent, attention and high-profile projects between Netflix and Disney — and next year is looking like it will become even more fierce.
Both entertainment giants appear to be feeling the competitive heat from one another, as Disney’s content deals dry up with Netflix while the latter poaches some of the former’s talent.
Those high-profile moves include, most recently, the hiring of ABC executive Channing Dungey, who will oversee half the streamer’s scripted originals as well as a large portion of overall deals, including working with the Obamas and Shonda Rhimes; and Chris Nee, the Peabody-winning creator of Disney Junior preschool hits Doc McStuffins and Vampirina, who jumped ship to Netflix after Alex Hirsch, who created Gravity Falls for Disney, did the same. Netflix is even getting more serious about consumer products, where Disney is a dominant presence among its entertainment peers, and it hired Disney veteran Christie Fleischer to head up the effort.
Not surprisingly, Disney's forthcoming streamer, Disney+, should include some Marvel original shows, and that apparently irked Netflix, which retaliated by canceling three of its five Marvel dramas — Iron Fist, Luke Cage and Daredevil, while the future of the remaining two, The Punisher and Jessica Jones, appears bleak.
While Netflix has a huge first-mover advantage over Disney+, the economics going forward favor Disney, which can more easily scale its shows and movies across the entertainment ecosystem while Netflix spends wildly to basically populate its own platform.
"There are so many competitors," CEO Reed Hastings said during an earnings call in October with reporters. "Of course, Disney is going to enter, AT&T is going to expand HBO, YouTube is just on fire growing around the world, video gaming like Fortnite, I mean there's so many ways to have great entertainment on a screen."
He added, "So we don't focus that much on anyone because no one seems to affect us that much. What affects us is can we produce the best content the world's ever seen?"
Disney+ won’t launch for another year or so, but it has a lot of work to do to try to reach parity, considering that Netflix will grow from its current 132.9 million U.S. users (as opposed to subscribers) to 169.3 million in 2022, per an eMarketer forecast. Amazon Video also has been at it for a lot longer than Disney, and it lags Netflix by about 53.5 million users stateside, though that’s still good enough for second place among subscription streamers. However, notes eMarketer analyst Paul Verna, “If any company is in the position to catch up to Netflix, it’s Disney, not Amazon.”
Analyst Todd Juenger of Bernstein figures that Netflix will spend $11.9 billion in 2019 on content and $14.5 billion in 2020. But the 22 percent year-over-year increase will be easily manageable because Netflix adds more than 25 million subscribers worldwide each year, for an additional $3 billion in revenue annually.
Juenger notes, "By the time Netflix gets to $20 billion annual cash content investment, … we believe they will, for all intents and purposes, be adding a new significant piece of content to the service daily." That’s important, he says, because while licensed shows may help in retention, it’s the original content that attracts new subscribers.
Netflix’s poaching spree may keep up unabated — or until it tires of paying Disney talent far more than their competitor was paying them.
Shonda Rhimes, for example, signed a four-year, $100 million-plus deal at Netflix after turning Grey’s Anatomy and Scandal into hit shows at Disney’s ABC. Black-ish creator Kenya Barris — who had a strained relationship with ABC — also jumped over to Netflix in a deal said to be in the high eight figures. Meanwhile, in film, Netflix struck a deal with Tendo Nagenda, who spent eight years at Walt Disney Pictures and worked on Queen of Katwe and A Wrinkle in Time.
Netflix isn’t only snapping up Disney veterans, it’s also copying the conglomerate in some ways. Following Disney’s live-action Jungle Book, which grossed $966 million globally in 2016, Netflix picked up Mowgli, Andy Serkis’ film based on the same Rudyard Kipling story that was made at Warner Bros, for example. Netflix also invested in developing comic book universes to lessen reliance on Marvel by paying $30 million to $50 million for Mark Millar’s Millarworld while also nabbing rights to Rob Liefeld’s Extreme Universe.
But even as Disney cuts content ties with Netflix (and vice-versa), there’s plenty more where that came from, says Juenger. “CBS, Sony, Lionsgate, MGM all seem to see Netflix as opportunity, not threat,” he says, adding that Viacom and its Paramount studio are “setting up new business units specifically” to license content to Netflix and other streamers.
Juenger adds that, far from Disney+ and Netflix beating up on each other, theirs is a healthy competition that could be beneficial because “increased availability and marketing of increasingly higher-quality SVOD products will accelerate the global transition to internet TV.”
As CEO Bob Iger envisioned during his November earnings call, Disney+ is only the beginning of the media giant's streaming efforts: "We plan to continually elevate the experience and enhance the value to consumers with a constant pipeline of exclusive new content as we move forward."
Lesley Goldberg contributed to this report.
A version of this story first appeared in the Dec. 18 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.