Netflix: The New, Better Disney?

'Squid Game' on Netflix
With hits like 'Squid Game,' analysts are wondering if Netflix could knock Disney from its media perch. (Image credit: Non Juhan/Netflix)

Netflix managed to impress Wall Street with better than expected subscriber performance in Q3, silencing its critics for the time being and causing at least one analyst to wonder if the streaming video pioneer could knock The Walt Disney Co. from its perch atop the media landscape.

Netflix added about 4.4 million subscribers in Q3, ahead of its guidance of 3.5 million additions. That performance comes after a Q2 when the streaming giant added just 1.54 million new customers and caused some industry pundits to speculate that the company was headed for a prolonged subscriber slowdown, exacerbated by the pandemic and increased competition from other streaming services. 

The subscriber beat comes shortly after another streaming juggernaut, Disney Plus, said last month that its fiscal Q4 customer additions would be in the single-digit millions, well below past quarters. But as analysts are changing their perceptions about Disney and its streaming service, at least one believes that Netflix, which earlier this year announced plans to enter into video game production and has ongoing forays into merchandising and film and TV production, could replace the Mouse House as the premier entertainment conglomerate. 

In a research note Wednesday (Oct. 20), Barclays Group media analyst Kannan Venkateshwar noted that about eight years ago, Netflix co-CEO and chief content officer Ted Sarandos’s goal was to “become HBO faster than HBO becomes us.” 

With a strong content slate expected to drive subscriber increases through Q1 2022, growth opportunities in Latin America, strong margins and the company’s unique approach to content, Sarandos may have been selling himself and the company short nearly a decade ago, according to the analyst.   

“Now HBO isn’t even in Netflix’s rear-view mirror,” Venkateshwar wrote. “Management framing of new opportunities seems to indicate that the benchmark now may be to surpass Disney’s flywheel.”

The Barclays analyst pointed to Netflix's entrance into gaming earlier this year and that other new business lines like merchandising — which he estimated is a $5 billion annual business for Disney — and the way the company sees its content as “continuous experiences” across video, gaming and live entertainment platforms, only adds to the momentum.

“This in turn could make Netflix’s business model and engagement almost impossible to replicate for most, except maybe some of the gaming platforms,” Venkateshwar wrote. 

The comparisons to Disney weren’t lost on Netflix management either. On Netflix’s quarterly video interview call, chairman and co-CEO Reed Hastings said while it could take several years, the plan is to integrate interactivity, gaming, and consumer products into its content.  

“Maybe imagine three years from now and some future Squid Game is launching, and it comes along with an incredible array of interactive or gaming options and it‘s all built into the service,” Hastings said. “And then, of course, you've got your off-Netflix aspects, the experiences that we're building out, consumer products, all of that coming together. 

“So a company like Disney is still ahead of us in some of those dimensions of putting that whole experience together, but boy, are we making progress,” Hastings continued. “And so exciting over the next three to five years, kind of closing that gap. And hope to pass them on that spectacular all-around experience.”

Mike Farrell

Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.