How will Netflix (Netflix Stock Quote, Chart NASDAQ:NFLX) make out now that entertainment giant Disney is joining the streaming service market?
Not a problem, says sector analyst Matthew Thornton of SunTrust Robinson Humphrey, who argues that Netflix has a number of revenue-generating streams it has yet to tap into.
On Thursday, Disney finally announced details of its Disney Plus streaming service, stating at an investor event that the new venture will launch in the United States in November at a price of $6.99 a month or $69.99 per year (all figures in US dollars). The cost is noticeably in contrast to the $13.00 per month customers are currently chipping in for their Netflix subscriptions, as many are expecting Disney to represent a stiff challenge to Netflix’s supremacy over the streaming sector.
Thornton doesn’t think so, saying there’s enough room for Disney and its kid-friendly content without Netflix being seriously challenged.
“These are not exact alternative services. Disney is Pixar, it’s Marvel, it’s Lucas —this is family content. If you look at Netflix and the most-searched shows on the Netflix platform, these are predominantly adult drama, comedy, horror, suspense, animation, documentaries and lots and lots of international content,” says Thornton, in conversation with CNBC’s Fast Money Traders on Thursday. “This is not Disney Plus content, so these are not perfectly complementary products.”
“What Netflix’s friend has been is complexity and confusion. There are so many different products and solutions out there, some of them mainstream but some of them very niche-y, while Netflix all along has just been very simple,” he says.
“I can sign up anytime I want, I can leave anytime I want, there’s a massive selection of content, the pricing is very straightforward. So as long as everything away from Netflix is somewhat confusing to the consumer, this benefits Netflix,” says Thornton.
Earlier this year, Netflix management guided for lower-than-expected financial results over 2019, in part due to the company’s push for delivering more original content, a move which has been seen as a response to the increasingly crowded field of online streaming services from the likes of Amazon, AT&T and Disney.
Thornton argues that growth for Netflix is far from over, as the company still has a number of avenues to explore.
“I think that some of the levers that it can pull in the near term would range from merchandizing, which they’re already starting, to things like product placement,” he says. “Monetizing the box office is something that they could always elect to do when push comes to shove, and then finally just licensing their own content which they’re doing a little bit of right now by putting some of their comedy channels on Sirius XM, for example.”
“The other lever is pricing. If you look at developing markets where they are still at $10 a month, they can certainly lower that on mobile-only plans and bring it down to $3 or $4 to drive faster acceleration and penetration in a market like India,” he adds.