Disney+ and Netflix: Ads to the rescue?
June 14, 2022
A report from analysts at MoffettNathanson (MN) examines the recent decision by Netflix and Disney to re-examine their streaming strategies and in particular to launch ad-supported options. The Disney decision, for example, had been 3 years in the making.
MN says that Netflix has the potential for much larger global ad growth, yet the domestic advertising opportunity for Disney+ appears greater due to a much lower starting RPU vs Netflix, a more developed advertising infrastructure, pent-up demand, affinity for Disney content, and greater monetisable content availability as Disney owns the majority of their content.
“For both Netflix and Disney, the growth of high incremental profit ad dollars should augment 2025 operating margins by +200 to +300 basis points, respectively,” suggests MN.
MN praise the pair and their ability to set viewing records (helped by the likes of current hits Stranger Things and Obi-Wan Kenobi) and the resulting ad-supported streaming products to create a second income line and increase customer adoption – and profits.
MN also wonders whether the strategy is like to spread to Apple TV+ and Prime Video, and also considers the likely impact on Hulu’s SVoD service (already generating some $2.7 billion of advertising revenues – and more than all the other existing broader hybrid ad-supported SVoD services combined).