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Netflix vs. Disney+: Which Is The Better Company And Stock?

Which is a better investment: Netflix or Disney? MavenFlix makes an assessment and concludes that both can probably coexist in a portfolio.
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The growth prospects in the streaming sector are compelling, which attracts many media companies to this promising market. As a result, some investors may be overwhelmed by the decision of which streaming stocks to invest in.

MavenFlix often talks about Netflix and Disney, as we believe that both are great companies with growth potential in the space. But which stock is the best? Or rather: is it even clear that there is a better one? Today, we will do the comparison.

Figure 1: Netflix vs. Disney.

Figure 1: Netflix vs. Disney.

Exclusive content is essential

At a high level, and at the risk of oversimplifying things a bit, a business can only be successful to the extent that it offers the products and services that its customers want. In the case of streaming, the size and quality of the content catalog is crucial.

Having a vast content portfolio is essential to attract new subscribers and keep users on the platform. This is where Netflix thrives. With a catalog of more than 15,000 titles, the company is way ahead of its rival Disney, which has fewer than 10,000 shows on its platform.

However, as new players enter the market, the content universe gets diluted across a larger number of competitors. For instance, a TV show producer that once licensed its content to Netflix may now choose to launch its own streaming channel – think NBC’s Peacock.

This is where exclusive content comes into play (see chart below). Here, Disney arguably has the advantage, as it is an older and better-established company with a vast array of films produced. However, Netflix is seeking to close the gap by investing heavily in exclusive material. By 2021, the company is expected to spend around $17 billion developing new content.

Figure 2: Why did you subscribe to a specific streaming service(s)?

Figure 2: Why did you subscribe to a specific streaming service(s)?

Loyalty: here is the catch

Another important point in the analysis is the subscription dropout rate, known as attrition or churn. Here, Disney has the upper hand. Even though it is a much newer service, Disney+ has a churn rate that is comparable to Netflix’s. When it comes to the company's Bundle (which includes Disney+, Hulu and ESPN+), Disney has a lower drop-out rate than that of its competitor.

Maybe, with exclusive Netflix content becoming more prevalent and new features constantly being added to the subscriber packages (e.g. a pivot to games), this loyalty gap could narrow.

Figure 3: Percentage of users survived in 6 months subscribed in November 2019.

Figure 3: Percentage of users survived in 6 months subscribed in November 2019.

Content spending

Still on proprietary content, Netflix is currently the company that spends the most on its own productions (see below). Netflix has the largest market share and is not willing to lose its position – therefore, it needs to be constantly innovating and outspending its competitors.

Compared to Netflix, Disney is well behind on content spending. In fact, the company invests the least among its key competitors. This can be a dangerous strategy in the long run, as Disney’s material continues to age and, possibly, becomes less relevant over time.

Figure 4: Spend on content.

Figure 4: Spend on content.

In conclusion

Netflix and Disney have their own strengths and weaknesses, but both seem to be winners in the streaming wars. Instead of choosing one, we think that keeping both in the portfolio might make more sense – understanding, of course, that Disney is more than a streaming company.

On the one hand, Netflix has a first mover advantage in the space and is just now expanding its business to other niches and markets. On the other hand, Disney has the brand recognition that most competitors can only dream about. Its existing content can be key in making the company a top player in the white-hot streaming space from the get-go.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting MavenFlix)