Apple TV+ or Disney+ the Real Netflix Threat?

All eyes were on Apple about one month ago when -- in what was one of media/tech's worst kept secrets in years -- Apple revealed its long-anticipated (and inevitable) SVOD service. Its hoped-for "Netflix Killer." This is something I have expected for well over 4 years (see my blog post from March 2015). And, here's the thing. While Netflix is miles ahead of all other premium video subscription services and seemingly invincible, Apple will be an instant major SVOD player on day 1 when it launches later this year. A player that certainly won't kill off Netflix. But, a player that certainly can slow down Netflix's growth and take market share (contrary to a recent analysis in Variety). Both domestically and internationally (Apple plans to launch in over 100 countries).

Here's why.

We, the Apple faithful, already own and actively use 1.4 billion Apple devices worldwide (according to Forbes). And, expect Apple to be relentless when it finally enters the ring later this year, bundling its new premium OTT video service in all of our Apple TVs, iPhones, iPads, and Macs (remember a few years back when Apple "graciously" gave all of us U2's latest album with one push of its Cupertino button? Or when Apple Music launched to take on Spotify despite its seemingly locked-in global streaming music position? That's what I'm talking about). Unlike competing SVODs like seemingly all powerful Netflix, no separate install or sign-in will be needed. That’s some massive automatic and instantaneous distribution. Some would say, its very special (Apple) sauce. Who can compete with that?

Yes, that’s right. Crickets. No one can. Not even Netflix. That’s precisely why Apple Music (on the music side of the house) is fast catching up to Spotify in terms of paid subscribers worldwide, even though Spotify previously seemed untouchable. In fact, Apple Music’s paid subscriber count in the U.S. now eclipses Spotify’s. That's the power of bundling -- of native integration of a service in the hardware (no extra steps needed).

But wait, there’s more. Apple likely will steal a Prime page from Amazon’s playbook (yes, I said that) and offer a single subscription price that combines its Originals, music and significantly revamped news/magazine offerings. Sure, Apple won’t be able to offer free next-day shipping like Amazon. But, Apple does offer immediate digital access to content (not to mention Cupertino cool and swagger). 

So, what will the price be for Apple TV+ at launch? Well, because Apple didn't want us to fixate on that question at last Monday's event (we did anyway) -- but instead wanted us to focus on Oprah and all the other great "traditional" creators/stars squarely in their camp -- nary a peep was made by Tim Cook about that subject. But, since he did announce Apple's new "News" service subscription at $9.99/month, it wouldn't surprise me if Apple charges more than Netflix for its upcoming SVOD. After all, Apple never tries to be the low cost leader. (Expect Apple to also offer "add ons" with news, games, etc.).  

Apple certainly also has the cash to fund its own massive slate of Originals to rival (and even out-gun) those of Netflix. Apple placed that story front and center in its rather conventional Apple TV+ "coming out" party last week, which featured Steven Spielberg in addition to Oprah. (As an aside, with such a significant focus on traditional names and creators, I questioned what Apple's big "hook" was for digital natives/millennials -- there seemed to be too little focus on younger creators and innovators perhaps more relevant to them. That was virtually missing in last week's presentation. Once again, don't forget Apple's failed U2 experiment from a few years back. As great as that band is, it isn't nearly as relevant to digital natives/millennials as it is to Tim Cook and Apple's long-time legacy). 

In any event, on the Originals side, Apple began to prep for Monday's inevitable event by investing big time in developing its own franchises back in 2017 to the (i)Tune of $1 billion. And, as of late last year, Apple had 24 Originals already in production and development. That count no doubt has risen significantly since then -- and will continue to skyrocket to fill its virtual shelves -- in an attempt to catch up to Netflix's existing, massive Originals programming hoard.

Even before Apple launches Apple TV+, Morgan Stanley predicts that Apple will ultimately rival Netflix. According to Mr. Stanley, Apple’s Netflix challenger will generate $500 million in 2019 alone, $4.4 billion by 2025, and count 50 million paid subscribers by that time. Even those predicted lofty numbers may be conservative, given Apple's 1.4 billion active device count. 

Formidable. Apple will be an immediate video force when it launches. If it builds it, we will come. We will certainly check out Apple TV+. To a certain extent, we have no choice.

But, will we stay? Will we ditch our Netflix accounts and switch to Apple TV+ for the sake of mere convenience and Oprah-driven star power? After all, apart from those elements, what are Apple TV+'s real innovations? I certainly didn't see or hear them at last week's Apple event. And, Netflix certainly features mega-star power of its own. 

But, hold on a moment. Let's not forget about Disney+, Disney's new SVOD Netflix "Killer", that it too plans to launch later this year. JPMorgan predicts that Disney's upcoming new SVOD will ultimately generate 160 million paid subs -- significantly more than where Netflix is today at 132 million! How can that be? Well, chew on this. Disney boasts content franchises that neither Apple nor Netflix can possibly match, no matter how much they try and are willing to pay. Apart from the classic Disney Princesses (which every single one of our kids watch over and over again in their early lives ... and over again some more), consider Disney's holy IP triumvirate of Marvel Comics, Star Wars and Pixar -- not to mention its new additions from Fox that include Avengers, X-Men and Avatar. Not THAT is star power that no one -- not even Spielberg or Oprah -- can match! And, Disney isn't good at sharing when it wants to win. In the not too distant future -- in a galaxy not so far far away -- we and our kids will be able to find all of those global mega-franchises only on Disney+ and Hulu (which is now controlled by Disney). Gone they will be from Netflix (said in true Yoda fashion).

So, yes, on day 1, Apple TV+ will be an instant SVOD giant and mega-player. But, with Star Wars and its other global franchises (not to mention Disney's global brand and unique multi-platform reach), "The Force" ultimately may be with Disney. Disney may become the real Netflix "Killer" (or, at least, maimer) (let's not forget JPMorgan's numbers above). 

And, given Netflix's fundamentally challenged underlying one-dimensional business model -- as compared to the multifaceted business models of behemoths Apple, Disney, Amazon and Google/YouTube -- perhaps Apple ultimately buys Netflix to beat back Disney's Millennium Falcon and become the undisputed long-term global, galaxy champ. Think about it. Not many could buy Netflix at its lofty valuations. 

Apple could .... 

Tell me what you think about Apple's chances? About Disney's chances? Send me a note to [email protected]