Children the world over have spent countless hours debating who would win in a fight between Batman and Ironman, or similar superhero faceoffs. But what would happen if the characters in “Star Wars” were to take on the contestants in “Squid Game,” or if Bart Simpson and his friends were to go up against Daphne Bridgerton and her sister debutantes?
When it comes to the latter, these battles are currently underway as Netflix (Nasdaq: NFLX) and Disney Plus (NYSE: DIS) both vie to become the victor in the war to dominate the streaming business -and investors are watching closely to see who will win.
Room for more than one player
Netflix has been steadily building its following since the company’s launch in 1997 and has since amassed roughly 214 million paid subscriptions in more than 190 countries. But Disney Plus, which launched two years ago in November 2019, has proven that streaming business is far from saturated and that slow and steady isn’t necessarily the winning formula when it comes to capturing subscribers in this space.
Not only has Disney Plus already amassed roughly 116 million subscribers -aided largely by the COVID-19 pandemic and people’s enhanced desire for new content during in the wake of social distancing and stay-at-home orders, the Mouse House’s streaming service has reportedly already surpassed $1.5 billion in sales since its launch.
Two very different businesses
The battle is far from over, however. While Disney Plus has the benefit of a major entertainment empire behind it and well-known brands such as Marvel and Pixar in its arsenal, coupled with lower price points than its biggest competitor, Netflix still maintains its hold as the largest player in the streaming space.
“Both Disney Plus and Netflix care about growth, but they’re in very different places. Netflix has all but saturated the North American market, so it’s growing more modestly here and looking to overseas markets for its more eye-popping numbers. Disney Plus, on the other hand, is growing relatively fast in the U.S. but hasn’t hit Netflix’s level of ubiquity,” said Stephen Lovely, editor-in-chief of CordCutting.com, noting that Netflix is a company, while Disney Plus is just a single offering from a major entertainment conglomerate that includes other streaming services such as ESPN Plus and a controlling stake in Hulu.
“Netflix is behind in the race for big-time intellectual property, but that hasn’t seemed to matter as much as many thought it would -maybe Netflix’s ability to spin out new hit originals without that huge IP will show us that big characters aren’t the end-all and be-all after all,” he said.
For investors looking to take a significant position in the streaming business who are only able to choose one player, Disney is significantly more accessible than Netflix. In its most recent day of trading on November 7th, Disney’s stock closed at $176.87. Comparatively, over the past 12 months the stock has ranged from a low of $134.10, which it hit on November 10, 2020, to a high of $203.02, which it reached on March 8, 2021.
Meanwhile, Netflix closed at $651.45 on November 7th, and over the past year has seen its stock price range between a low of $463.41 on November 10, 2020 and a high of $690.97 on October 29, 2021. But current trading prices don’t necessarily foretell the long-term prospects of either player and investors jumping into this space need decide whether they are looking to play a long game, or are seeking short-term gains.
Short and long term options
“A shorter-term trader should favor Netflix over Disney. Netflix sales have been accelerating at a faster rate than Disney. Over the past three years, Neflix revenue has grown 81.29% versus Disney’s 7.08% on a relative basis,” said Louis Llanes, founder of Wealthnet Investments, LLC.
“Netflix earnings before interest taxes and depreciation (EBITDA) is also improving at a better rate relative to Disney. This can be attributed to the fact that Netflix content is trendier and favored by the demographic that spends money on content. Disney is a more stable investment whereas Netflix is more dynamic and could be a better trade for shorter-term investors.”
For investors looking to play a long game, however, Disney may be the way to go.
“Disney is by far the safer long-term investment and could well even have more growth potential over time. They are a multimedia powerhouse with what is arguably the most impressive collection of entertainment IP in the world,” said Nicholas Creel, an Assistant Professor of Business Law at Georgia College And State University.
“Star Wars, Marvel, Disney classics, Fox Studios, ESPN, and a majority hold in Hulu and more gives them an insurmountable edge in the content wars. Further, their being the newer entrant into the streaming world gives them more growth potential over Netflix which has been a streaming giant for some time already.”