Disney Plus a Netflix killer? Actually, it's Apple's headache now
At $7 a month, Disney Plus has set a bar that's hard for Apple to limbo under.
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Pixar's Toy Story 4 is expected to stream on Disney Plus early next year. Pixar's history overlaps with Apple's; for years, Steve Jobs was the animation studio's biggest shareholder.
They have the same last name, but Disney Plus and Apple TV Plus were unveiled to the world in completely different ways.
Less than a month ago, Apple put on a splashy event to reveal its subscription streaming service, Apple TV Plus. It christened the service with a name, paraded high-wattage stars through the Steve Jobs Theater, and CEO Tim Cook got to hug Oprah Winfrey. But Apple didn't touch the kind of details consumers crave: no price, no launch date beyond "this fall," and just a smattering of new details about programming. Would it have killed Apple to make a legit trailer or two?
Then last week, Disney held an unveiling for Disney Plus, and its executives came out swinging. Launch date? Nov. 12. Trailers? No problem, they brought plenty. Price? An unexpectedly low $7 a month.
The cost "generated a collective gasp in the room," analyst Michael Nathanson of MoffettNathanson said in a note Friday. "The service ... looks like a bargain compared to other entertainment options."
People love to speculate about whether every new streaming service could be a "Netflix killer." But even by Disney's own projections, Disney Plus won't come close to toppling Netflix's lead in subscribers for years. No, the streaming services that should be nervous are those built on a foundation of curated, high-quality programming with a price tag to match. That includes HBO, Showtime and -- crucially -- Apple. (Note: Showtime is owned by CBS, the parent company of CNET.)
And Apple, unlike those others, is in the spotlight. Apple TV Plus is a big-budget, brand-new realm for the gadget giant. The company hasn't characterized how it'll price Apple TV Plus yet, and that gives the company flexibility others don't have. But Apple TV Plus will be launching in the midst of Disney's all-out marketing blitz splashing its $7-a-month price in front of everyone.
Netflix plus Disney Plus?
If you feel like too many companies are launching too many streaming video services, you're not alone.
People are already reaching their limit: The average US consumer has three streaming video subscriptions, and nearly half of consumers are frustrated by the growing number of services they need to have to watch what they want, according to a study by researcher Deloitte last month. "Consumers may be entering a time of 'subscription fatigue,'" Kevin Westcott, Deloitte's vice chairman, said in the report.
If there are three slots for streaming services in each household, and not much room to include more, that leaves streaming companies to battle over limited real estate. And with Netflix so dominant in the market, that may mean they're fighting to be consumers' second and third picks.
"Everyone wants to talk about Disney Plus as a Netflix killer," BTIG analyst Rich Greenfield said in a note. "Increasingly, Netflix feels like basic cable for the streaming world, with services such as Disney Plus becoming add-ons like HBO has been historically."
A Netflix spokesman said only, "Great competitors make for great consumer experiences."
Disney Plus will compete with HBO, Showtime, Starz and a host of other paid streaming subscriptions, but it'll be competing most squarely with Apple.
In addition to launching around the same time, both Apple TV Plus and Disney Plus are leaning hard into exclusive online originals as one of the main reasons to subscribe. Where Disney Plus has big-budget Star Wars spinoff The Mandalorian, for example, Apple TV Plus is touting its sci-fi series produced by Steven Spielberg.
Disney's spending on original content for Disney Plus is in the same ballpark as Apple's spending, too. Greenfield estimates that Apple's yearly spending on original shows is about $2 billion. Disney said Thursday that it's investing a little more than $1 billion cash in original programming this year, and it expects that number to grow to about $2.5 billion by late 2024.
Tim Cook escorted Oprah Winfrey around Apple's campus after the company revealed her programming plans for Apple TV Plus.
By comparison, Netflix spent $12 billion on content last year. Now, that's spending on originals as well as payments to license other companies' shows and movies -- including money Netflix paid Disney to be the first place to stream films like Coco and Avengers: Infinity War. (Because of the magic of corporate accounting, Disney will actually pay itself to license those movies now. It'll pay license fees to its own studios and media networks to the tune of $1.5 billion this year.)
Apple hasn't specified whether it'll license a library of shows and movies to supplement its originals. And that's where the company's challenges begin to rear up.
If it sticks to its own originals solely, Apple will need to price TV Plus far below Disney's $7-a-month rate to be competitive. Though Apple's pipeline includes more than 30 original shows and movies, only a handful are expected to be ready at launch. Disney Plus hasn't characterized its Day One catalog, but it'll have over 7,500 episodes and more than 500 movies by the end of its first year. That's scale Apple can't match on its own.
In one respect, Apple may be in a position of unmatched flexibility. Disney laid its cards on the table early, and unlike streaming competitors like HBO and Showtime, Apple doesn't need to price Apple TV Plus in a way that syncs with what people pay for those networks on cable. That's partly why HBO charges $15 a month and Showtime $12 -- near or above what Netflix charges for a much smaller catalog.
And some speculate that Apple could offer TV Plus for the ultimate impossible-to-beat price: free. Some, like Greenfield, expect Apple to provide free access to its shows if you watch on an iPhone, iPad or Apple TV. And Apple could charge a subscription fee to people who don't own its gadgets.
But it's also reasonable to doubt that theory. Apple, known for premium products with high price tags, would be acting out of character to give away free programming.
Apple declined to comment for this story.
No matter what, Apple will need to calibrate its plan for Apple TV Plus against what Disney has already laid out. If it fails to, consumers may not know what they're missing on Apple -- and while they're binge-watching The Mandalorian and Captain Marvel, they might not care.