The internet erupted on Tuesday afternoon with the news that Disney was pulling their films from Netflix. Many cried foul, despairing the soon-to-depart properties that would disappear from “My List.” Others saw a future filled with too many $9.99 streaming subscriptions, and questioned the success of the venture.

This reaction is understandable, especially with recent hits like Moana and Rogue One having just hit Netflix recently. But it won’t be that bad when 2019 rolls around. A dedicated Disney streaming service is a good thing, and not just for them. It will improve the market, and ultimately create a better environment for consumers.

Disney Stream is good for Disney

Perhaps this is obvious, but Disney Stream (my unofficial moniker for it) is a good thing for The Walt Disney Company. Hidden in Tuesday’s Netflix news was the more negative announcement of their third quarter earnings. Revenues were flat, net income was down 9%, and most troubling was cable and broadcasting profits, down 23%. They need a change, and they know it.

Disney Stream, along with their new ESPN subscription service, can help alleviate these problems. Consumers have been fleeing traditional cable and broadcasting due to a combination of high prices and limited content for years. ESPN, Disney Channel, ABC, and ABC family have all suffered as a result. To combat this, Disney has spent the last few years rebranding and moving toward streaming: ESPN has a limited app, Disney Channel has full episodes on YouTube (including the new Star Wars show Forces of Destiny), ABC has a strong Hulu presence (of which Disney owns a minority stake), and Freeform was just rebranded.

Disney released ‘Forces of Destiny’ exclusively on their YouTube channel during summer 2017

The last pieces of the empire are Disney’s animated and feature films. They do have limited streaming presence, but is unfocused and somewhat confusing. Some films are available only on Hulu, Netflix, or Amazon, and some on multiple. To watch their entire catalog, in theory, you have to subscribe to all three. And this doesn’t account for regional differences. Pixar films are all but absent from American Netflix, but present in some foreign markets.

A single dedicated streaming service fixes this problem. Disney Stream can be the go-to one-stop shop for all things Disney movies. They’ll also be including content, both carried over and original, from the Disney Channel. The result is a haven for family-oriented Disney and Pixar features.

The one caveat: Star Wars and Marvel will not be joining Disney Stream. They’ll be leaving Netflix, but their future home is undetermined. Perhaps they’ll have their own platforms, or maybe they’ll all be put on Hulu. In any case, finding where a film is able to be streamed will be immensely easier.

Plus, we might finally get that Star Wars live action show that’s been in development since about forever. That makes it all worth it.

Disney Stream is Good for Netflix

Disney leaving sounds bad, but the end result will be beneficial for Netflix. If there’s one area where the streaming giant has excelled, it’s adapting to a changing marketplace.

Remember that Netflix started as the killer of Blockbuster and rental stores, opting to deliver movies to homes using their famous queue system. Blockbuster and Walmart already had delivery systems of their own, but couldn’t compete with the small startup that was Netflix. All credit is due to Netflix’s incredibly complex and thorough distribution system, with shipping centers in every major city, almost completely automated, and tight patents.

Then, they killed their own business.

Netflix foresaw the direction of the world toward streaming, and began redirecting efforts, slowly but surely, into what was then called downloaded films. By 2011 they were ready to spin off their DVDs completely into the short-lived Qwikster. DVDs now makes up 9% of their business.

Remember this fiasco?

To accommodate streaming, Netflix had to completely change their business model. DVDs were bought and rented, one to one. Digital media, however, requires licenses. Netflix negotiates with rights holders (in this case Disney) for regional rights. They favor global rights, as it is cheaper and allows them to maintain a similar library in every region. This isn’t always possible, which explains why Fresh Prince of Bel Air or Pixar films were available in Brazil and the UK respectively, but not the US.

These licenses don’t come cheap. Netflix doesn’t own them, they simply “rent” them. And, in the case of Disney, they can be pulled at any time. Meanwhile, they compete with Amazon, Hulu, FOX NOW, CBS All Access, and more for views of the same content. But, par for the course, Netflix anticipated this, and has been moving away for years now.

House of Cards, Orange is the New Black, The Crown, Stranger Things, Unbreakable Kimmy Schmidt, Master of None, A Very Murray Christmas, Black Mirror, Louis C.K. 2017, Sarah Silverman: A Speck of Dust, The Square, Virunga, What Happened, Miss Simone?Amanda Knox, 13th, Chef’s Table, Making a Murderer, The Keepers, Bloodline, Arrested Development, Derek, Grace and Frankie, Patton Oswalt: Talking for Clapping, John Mulaney: The Comeback Kid, Bill Nye Saves The World.

Every single one of those Netflix original titles has been nominated or won an Emmy or Academy Award. They have defined the modern landscape of television. Next is film, with originals like Okja debuting at Cannes, and their documentaries already winning Oscars.

Netflix continues to rise in the ranks for award winning programming

Netflix spends $6 billion a year on their own programming. Every dollar no longer spent on Disney licenses is another put towards quality original content. Subscribers came for the familiar, but stayed for the original. They stay for the shows, films, comedy specials and documentaries that are high quality and new.

Disney leaving doesn’t hurt Netflix; it emboldens them.

Disney leaving is good for the market

It’ll be hard to explain to the newest generation of kids that there used to be two Streaming Video on Demand (SVOD) services: Netflix and Hulu. The race is still fairly new, but the pack is growing.

Netflix, Hulu, Amazon Video, YouTube Red, HBO NOW. These are the biggest names in streaming. Others are joining, like CBS All Access and its original Star Trek: Discovery.

Disney Stream will be just one of many by the time 2019 rolls around. And that’s a great thing for the industry. Because Gordon Gekko was wrong. Greed isn’t good; competition is.

Gordon Gekko if ‘Wall Street’ was remade today

For years now, Netflix has sat atop the pile, with 128 million subscribers and 66% market share of SVOD users. Amazon comes next, with 85.3 million viewers, and 44% market share. Hulu brings up the rear with 32 million subscribers and 16.5% market share.

But with companies like Disney pulling out of these existing services and creating their own, Netflix, Amazon, and Hulu’s dominance begins to wane. FOX, ABC, and NBC may follow CBS’ lead and create their own original programming for their streaming platforms. Youtube Red has a small but strong 1.5 million subscriber base, and looks to grow that number with popular originals like a Karate Kid offshoot series (which they outbid Netflix, Amazon, Hulu, and AMC for).

Competition leads to innovation. As more players enter the game, existing platforms will have to improve, focusing on original content and high quality user experiences and app design.

Of course competition has another beneficial consequence, and it’s probably the only one you really care about: Cost.

Disney leaving is good for the consumer.

This is where most folks were upset. Disney Stream is yet another $8.99-$12.99 streaming service they’ll have to pay for. Another app, another service, another bill.

But that’s assuming all else stays the same. And that’s now how markets work.

Let’s assume the trend continues, and dozens of companies begin pulling their content and offering their own streaming services. The aforementioned increase of original content is obviously good for consumers. So is the price change.

More SVODs means more competition for the same subscriber. Very few are going to subscribe to every service, just as relatively few pay for the premium cable packages that include every single channel known to human kind.

As a result, each SVOD will need to either A. improve their content and platform to justify the cost not just of their service, but of their subscribers having multiple services, and/or B. lower their cost.

Netflix
The virtually endless content of Netflix/Amazon/Hulu

So subscribers can expect more options, higher quality, and/or lower cost. But they also get more flexibility. Right now, you pay for Netflix, Amazon, and/or Hulu, and you experience a fraction of the total content. Thousands upon thousands of titles that you likely have never, and will never, watch. Similar to cable packages, you’re paying for things you don’t ever use.

But if you only care about the Disney shows and films on Netflix, Amazon, or Hulu already? Then this is amazing news. Now you can pay for just that “channel.” Even if you do end up wanting 4-5 “channels,” the end cost will inevitably be less than paying for cable television.

 

So will it be worth it?

Funnily enough, we actually have an answer for this. Disney already has a streaming service in the U.K. called DisneyLife. It’s been around since 2015, and has far more content than anything Netflix can offer.

The service carries television shows from Disney Jr. and Disney Channel, and feature films from Walt Disney Animation Studios. It also carries audiobooks, music, and e-books. The service is available online, through mobile platforms, and through TVs with services like Chromecast.

Disney’s future streaming service will likely look different, given that they bought BAMTech, the video-streaming infrastructure service created by the MLB. BAMTech will be the powerhouse behind Disney Stream, as well as their also-announced ESPN streaming.

Nonetheless, DisneyLife gives consumers a big clue into the future of Disney’s properties and their streaming. The other upside: DisneyLife also includes a live TV component that carries Disney Channel, XD, and Junior. While that has not been mentioned in regards to Disney Stream, it could be another thing to look forward to.

Disney leaving Netflix is a good thing. Disney gets easy to find, all-in-one content, and original programming. Netflix gets more money for their original content. The market becomes more competitive, providing higher quality products. And the consumer gets better, easier to find, and likely cheaper stuff.

In the end, change is almost always good. And the House of Mouse will have yet another area in which to dominate.