Question

Compare Disney and Netflix structures. Consider such items as hierarchy, centralized/decentralized, geography, functional/divisional. Include other comparatives. Include a Comments/Notes column for additional thoughts.

Answer 1

Popular movies and TV series are now available on the smart devices like mobiles and tablets through online media streaming. All players in the market are trying hard to capture the emerging markets as it is becoming popular over the last few years. Disney is all set to disrupt the market with the launch of direct-to-customer service. The major difference for consumers will be in the form of Disney contents being removed from Netflix which will be its main competitor and making them available through its own service.Netflix and Disney are two of the biggest media companies in the world.

In terms of operations, Netflix has one of the simplest business models in corporate America. The company licenses movies and series from other studios like Disney and Warner. It also spends billions of dollars every year in producing its own Netflix Originals like Master of None, The Patriot Act, and Chewing Gum. It then makes money from the money subscribers pay every month. In the US, this price ranges from $10.99 to $15.99 per month. In the most recent quarter, the company has more than 148.8 million global members. Of these, 60.2 million are from the US. In the quarter, the company had revenues of more than $4.52 billion. It now has a market capitalization of more than $150 billion and more than 7,100 employees.

Disney, on the other hand, is a more diverse company that makes money from tens of places. In 2018, the company made more than $59 billion from its four segments. The media networks generated $24.5 billion while parks and resorts, studio entertainment, and consumer products generated $20.2 billion, $9.9 billion, and $4.6 billion. The main challenge for Disney is that its traditional bread and butter business in television are slowing down as many Americans cut the cable. To pivot, the company has moved to streaming in a number of ways. In the UK, it owns Disney Life, which is a streaming service with most of its titles. It now owns Hulu, which has more than 25 million subscribers. It also owns ESPN+, which has more than 2 million members. Analysts at Barclays believe the service could have more than 1170 million subscribers by 2025. It now has a market cap of more than 237 billion and 201k employees.

Disney is closing the deal with Netflix by the end of 2018 for the rights of streaming to make the grounds ready for its own show. The decision is crucial as the Netflix platform brings in around three hundred million in annual revenue for the company. For the first time in the last two decades, market trends are showing that sales of movie tickets are decreasing in recent years. People watching movies in theaters have declined by seventeen percent since 2012 for the age group of 18-to-24 years. Moreover, Disney is right in expecting that the trend is just a sign of more drastic change in coming years. Netflix is in the frontline of the digital media revolution. There is a trend of relying on digital streaming services instead of cable and customers are either leaving cable packages or not signing up for it. Both the Disney Channel and ESPN have been experiencing the silent and steady decline in subscribers.

The Walt Disney Company already has TV-shows and movies that consumers want and have a record of hit movies like ‘Star Wars’, Marvel, and Pixar. Disney has a capability to produce excellent media content that consumers are actively seeking. It does not need to spend on trial and error to make hit content for its new service because it already owns the rights to such valuable media properties. In 2018, Netflix has plans on spending around eight billion USD on content development while Disney does not have this pressure. Disney has its media library produced since its inception years ago. A built-in base of subscribers can be generated with its extensive intellectual-property library which is expected to pull in loyal Disney lovers.
Disney has also acquired Twentieth Century Fox movie studio, the National Geographic, Sky, and FX networks to strengthen its base. The deal with Twenty-First Century Fox’s entertainment business could be decisive in its bet to grab the market from Netflix.

Netflix has seen an unprecedented response from people and its subscriptions are on the rise. Its growth plans were supported by investors with the huge amount of capital. It eventually decided to make its own content and offering a mass of successful programs. The company is making strategies to stream at least half of its content as its original in-house productions. Disney has seen this as a potential threat and decided to develop its own platform.
Disney has announced recently that its movies will be removed from Netflix in 2019, followed by the launch of its own streaming platform. Netflix shares declined by four percent in extended trading. The epic battle is clear at least initially– Disney with its own media content is developing its own platform while Netflix with its own platform is developing its own media. Market experts can perceive the challenge Disney is putting before Netflix.