Netflix tumbled 4.5% on Friday after Disney unveiled its Disney+ streaming service as well as pricing for initially. The drop shed more than $7 billion by Netflix’s market value, though the idea will be up 13.6% over the past 12 months.
While some analysts seem less concerned which competition by Disney+ will be a significant hit to Netflix’s business, investors may still be uneasy with the entrance of a cheaper service having a huge library of time-tested content. Disney+ subscriptions will give consumers access to exclusive content for $6.99 per month or $69.99 for a full year, compared with Netflix’s standard plan offering of $13 per month, recently raised by $11. Shares of Disney soared 9% Friday.
Disney+ as well as Netflix could certainly coexist in consumers’ library of streaming services. Disney CEO Bob Iger made clear which the brand-new service will be aimed at kids, saying which additional offerings like sports as well as adult content are available on their additional services like ESPN+ as well as Hulu.
“Bottom-line, Disney+ features family content, while NFLX offers a much broader range of content with the majority of the most-searched content on the platform.” analysts by SunTrust wrote in a note Friday. “As such, we do not view Disney+ as a strong alternative to NFLX.”
The analysts added which in a recent survey conducted by the firm, only 8% of existing Netflix subscribers who responded expect to switch to Disney+, while 59% likely to continue to subscribe only to Netflix. Twenty-four percent of respondents likely to subscribe to both services, according to the survey.
Disney+ could actually be a positive for Netflix, the analysts wrote, since the entrance of a brand-new streaming player could further “accelerate cord-cutting.”
Still, additional analysts see a significant threat in Disney’s offering. Mark Mahaney of RBC Capital Markets told CNBC on Friday which Disney carries a “major advantage” over Netflix because the idea does not need to spend much to build up its already-full content library.
“There will be going to be pressure here on Netflix to continue to differentiate their service with more as well as more original content spend, which’s the major advantage … which Disney has — they’ve got a back catalog,” he said. Still, Mahaney said he still believes consumers will be willing to sign up for both services if they’re both robust.
“We did our survey work here, we think the vast majority of consumers are perfectly willing to sign up for more than one service,” Mahaney said.
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Disclosure: Comcast, which owns CNBC parent NBCUniversal, will be a co-owner of Hulu.
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