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Anime over Hollywood: how Japan is redefining storytelling
by Luca Fontana
Disney+ is here – making the same mistakes as Netflix
24.3.2020
Translation: Patrik Stainbrook
Disney+ is being rolled out internationally. Judging by current subscription figures, the service is a blinding success. But whether this will last depends on Disney avoiding Netflix' old mistakes.
If it were up to Disney, the second season of The Mandalorian would already be out now. After all, «The Mandalorian» is a huge success, being praised by critics and fans alike. It's also a big reason for the meteoric rise of Disney+.
A lucky break for Disney, as CEO Bob Iger had actually expected much lower growth, about 18 million subscribers per year. With that, the first step towards establishing the largest possible customer base has already been taken.
The next step is to retain this base in the long term. Whether or not this will succeed depends on whether Disney can avoid the mistakes of Netflix.
And that doesn't seem likely.
Netflix: from video and DVD rentals to Streaming giant
What mistakes? Allow me to explain. Above all, we must look at how the former DVD and video rental company became a titan of streaming.
By the end of 2007, Netflix CEO Reed Hastings saw the end of physical storage media coming before anyone else. That's why he puts all his eggs in one basket: Streaming. For the company, this meant giving up its own video and DVD rental business. Instead, royalties are paid to distribution and production companies to include their films and series in their own streaming library – Disney among a few others.
A gamble. Because in 2007, streaming quality is rather lousy. Worse than DVDs. Nobody was excited about that kind of a service.
But the risk pays off.
Netflix steadily improved its streaming quality and library. Between 2007 and 2010, the newcomer entered into partnerships with Microsoft, Sony and Apple, making its app available on numerous platforms. By the end of 2011, Netflix had over 20 million members.
Scepticism gives way to confidence. Distribution and production companies see Netflix as a new, attractive source of revenue. Precisely because DVD sales are collapsing, claiming prominent victims. One of them being the former distribution giant Blockbuster.
Netflix establishes itself. But its meteoric rise also reveals how much money is hidden in the streaming business and its subscription model – money that distributors and producers also want to get their hands on.
Negotiations on license renewals become more complicated; copyright holders are demanding ever higher fees. Netflix is still in the race. For now. But the radically changing streaming market demands a new strategy: in-house productions.
What does all this have to do with Disney+?
Netflix now has 167 million subscribers. Last summer it was 150 million. Subscriber numbers are still going up.
In other words, Netflix isn't growing fast enough to sustainably cover the ever-increasing operating costs.
According to Nasdaq, the company has been spending about 2 billion dollars more than it earns every year since 2016. So far, this has had little effect on share prices; confidence in Netflix is high. But if the Californians continue to make less money than they «burn», investors will bail out.
And Disney+ is headed towards the same brick wall as Netflix.
Let's take a closer look at Disney+
Disney's starting point is different from Netflix': Disney can avoid expensive royalties thanks to its infamous Disney Bunker already containing most classics. In addition, there are also acquired brands.
There's the Disney and Pixar animated movies for example, perfect for families and children. There's the Marvel and Star Wars films, some of which are among the most financially successful and celebrated films of all time. And National Geographic, as the icing on the cake, offers Oscar-winning documentaries for the curious. All in one place: Disney+.
Disney knows that its backlog – a library of exclusive in-house productions – is secured for the long term; unlike Netflix, it won't shrink due to expiring licenses. This library is also possibly the most attractive one on the market. At least from a Hollywood perspective: Pixar, Marvel or Star Wars – these are powerful brands. There's much less pressure on Disney to constantly disgorge exclusive in-house productions.
In other words: Disney doesn't have a backlog problem like Netflix does.
However, this alone is no guarantee that the current 28.6 million subscribers will stay with Disney. According to a study published in Forbes, but not conducted by the magazine, the two main reasons for terminating a subscription in the USA are:
- A poor price/quality ratio.
- Not enough new and exciting content.
And they're the ones with a problem.
The problem: Disney Originals are... average
That's a long while to wait.
So what does Disney have to do better – apart from the obvious, namely to produce better originals?
Away from the mediocrity of a Netflix original!
Because of its backlog problem, Netflix has to produce a lot of new content in a short time. Sometimes at the expense of quality. Something like «Stargirl», for example. But this tactic of «as long as there's something for everyone» can only work for Netflix. After all, that's their strength: anyone can find something they like on Netflix.
But what does Disney+ stand for?
Little games like this one don't help when establishing a new brand. Disney must learn to define itself beyond its own historical name and that of its daughter brands. And soon. What would help is production of quality content. Even better: only quality content. Just like old Netflix did with «House of Cards» and «Orange is the New Black». Just like Disney did with «The Mandalorian» four months ago.
Instead, we get «Stargirl» and «Timmy Failure».
A focus on quality would give people real reasons to keep their Disney+ subscription after watching The Mandalorian. Even if the House of Mouse can't offer the same quantity and diversity as Netflix.
For such a tactic, Disney's starting position couldn't be better. The company can even afford to be patient. There's no urgent backlog problem. Only Disney isn't following this road. What's even worse: Disney, in an attempt to compete with Netflix, is repeating Netflix' decision to favour quantity over quality, which Forbes has at least questioned.
We'll find out more in August with the release of «Falcon and the Winter Soldier».
Luca Fontana
Senior Editor
Luca.Fontana@digitecgalaxus.chI write about technology as if it were cinema, and about films as if they were real life. Between bits and blockbusters, I’m after stories that move people, not just generate clicks. And yes – sometimes I listen to film scores louder than I probably should.
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