The race for premium streaming video leadership basically boils down to Walt Disney‘s (NYSE: DIS) Disney + and Netflix (NASDAQ: NFLX)The latter will always be in the conversation. Netflix kicks off 2020 with 203.7 million paid streaming memberships worldwide, and it expects to reach nearly 210 million by the end of next month.
Disney + has less than half of Netflix’s premium number, but it is growing significantly faster. It had ballooned to 94.9 million premium subscribers in early January, a stellar achievement for a platform not even 14 months earlier.
Of course, Disney has a lot more to offer than Disney + – and we’re getting there soon – but it’s just as much a place to decide which market enthusiast should be in your portfolio. Is Disney the better buy? Is Netflix the better addition? Let’s dive deeper to see which one should be at the top of your shopping list.
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Nothing but Netflix
Disney + naturally grows a lot faster than Netflix, but let’s not assume the top dog is a slowpoke. Netflix had 158.3 million premium accounts on its reels at the end of the third quarter of 2019, weeks before the Disney + launch. The 45.4 million net additions it has since scored is less than half of Disney’s market grab, but Netflix’s dominance is more than just raw viewership.
There is price elasticity for the Netflix model. It is raising the price of its most popular plan this year, something it has now done five times since early 2014. Average earnings per membership have increased from $ 9.88 to $ 11.02 per month, despite the push of cheaper international markets and foreign exchange headwinds.
Disney + costs significantly less than Netflix, and average revenue per membership has fallen since launch as it transfers its platform overseas with more affordable rates in emerging international markets. Disney’s average monthly revenue per user has dropped from $ 5.56 to $ 4.03 in the past year. We’re talking about Netflix in a new way with a revenue return that translates to $ 2.2 billion per month – almost six times more than Disney + at $ 382 million.
Netflix’s scale has an advantage. When you’re trying to sell a new movie or show, you want Netflix to reach the widest possible audience. No company can spend as much as Netflix without breaking the bank, as it can share its programming costs among the largest paying audience.
Netflix must win this fight? Turn right? Well, cue Mickey Mouse.
The mouse always wins
If this was just a battle between Disney + and Netflix, then the nod would of course go to Netflix. Disney’s market cap of $ 347 billion is $ 100 billion higher than Netflix’s. However, Disney’s eponymous direct-to-consumer streaming service is only a small part of the realm here. Disney + may be the company that generates all the rumors and headlines, but it currently represents only 7% of the media file’s revenue.
At this point, Disney + isn’t even the entertainment giant’s biggest money maker among streaming services. Hulu, owned by Disney, actually generates more than twice the revenue of Disney +. Investors also get the world’s most visited theme parks, ABC, and a majority stake in ESPN.
In a world where content is king, Disney owns Pixar, Marvel and Lucasfilm. This is a portfolio of intellectual property that was able to launch the six top grossing movies of 2019 – you know, when we got to the movies.
Netflix is great, and even with Disney running on all cylinders, Netflix will still be the faster-growing company. I own shares of both companies so I clearly believe both stocks can beat the market. However, because Disney has so much to offer outside of the fast-growing Disney + platform, it’s better to buy here.