When DisneyDISreleased its latest quarterly earnings report last Thursday, the big news was that its streaming service Disney+DIS reached 95 million subscribers globally as of January 2, almost quadrupling the subscriber base it had a year earlier. This is great news for the future of Disney’s direct-to-consumer business. Also, naturally, it’s bad news for its competitors, but it’s especially bad for up and coming subscription video-on-demand (SVOD) services.
Disney+ launched in mid-November, 2019, and just a month and a half later it welcomed 2020 with 26.5 million subscribers. Then, fueled by pandemic driven stay-at-home audiences and by international launches including in Europe and Latin America, Disney+ added close to 70 million subscribers in 2020 to get to the 95 million subscriptions. Now, a month and a half into 2021, it is likely that subscriber number 100 million has signed up or is about to do so.
The launch of Disney+ will be remembered as a major success, by reaching 100 million subscribers in just over a year. To illustrate the power of the Disney brand, it took NetflixNFLXabout 10 years to reach 100 million subscribers, in a period when it had little competition. Netflix just became the first SVOD service to reach 200 million subscribers, and in 2020 it signed up 37 million subscribers. But that’s just over half of the 70 million that Disney+ got last year.
The fact that Disney+ is reaching this milestone is an important development, so what does it mean for competitors? To answer that question, first let me offer a vision of the future of the SVOD market. Industry experts like Netflix’s co-founder Marc Randolph claim that there is only room in the market for a handful of major global streaming players. I have always envisioned that too, based 0n my studies of the more mature online travel industry, where only a handful of online agencies ended up dominating the market. This prediction is also in line with surveys that show most households are willing to pay for up to three streaming services. Therefore, there are only a few SVOD services that will become mainstream. Most others will fail or will be eaten up by the big ones.
So which SVOD services will succeed given that there are only a few slots? Netflix has certainly consolidated its position as the global leader. Disney+ is now in a very strong position to fight for second place globally with Amazon Prime Video.
Disney’s Hulu is also a serious contender in the U.S., with close to 40 million paid subscribers. But it’s not just Disney competing hard in this market. Other major media conglomerates have woken up to embrace direct-to-consumer distribution. Warner Media’s HBO Max is off to an excellent start since it’s launch in late May of 2020, reaching Hulu-level market presence with close to 40 million subscribers. Comcast’sCMCSAPeacock, which launched last April, is not far behind at 33 million. GoogleGOOGalso revealed in its latest earnings release in early February that it has 30 million combined subscribers for its YouTube Premium and Music services. The handful of slots available in the U.S. SVOD market are filling up fast, and yet there are hundreds of streaming services trying to remain relevant.
Fueled by the COVID stay-at-home audiences, a spike in new subscriptions in 2020 is helping to visualize which SVOD players will have a shot as the market matures. Netflix has always been in the picture. Suddenly Disney is standing out from the pack. That doesn’t mean there isn’t room for niche and regional players. But the early success of Disney+ represents a serious threat to SVOD services across the world that dream to become major players in their respective markets.