Disney has won the first stage of the streaming wars, and stage two won’t be as hard

(L-R) Phillipa Soo, Christopher Jackson, Lin-Manuel Miranda and Anthony Ramos attend Lin-Manuel Miranda’s final performance of “Hamilton” on Broadway at Richard Rodgers Theatre on July 9, 2016 in New York City. (Photo by Nicholas Hunt/Getty Images)

Nicholas Hunt

Ask media executives how many of the big streaming services will be “winners,” and you get roughly the same answer. Former WarnerMedia CEO and current AT&T CEO John Stankey said “four or five.” Starz CEO Jeffrey Hirsch said “four to six.” Hulu’s director of product management Jason Wong said “three to five.”

With 193 million paying subscribers, barring catastrophe, Netflix will be one of them. And I’m ready to call Disney+ a second winner. 

Disney CEO Bob Chapek said Tuesday Disney+ now has more than 60 million subscribers. Disney launched Disney+ in November 2019 — less than a year ago. At the time, Disney estimated Disney+ would have 60 million to 90 million subscribers by 2024. It reached that goal four years early. Key to that time range is it’s also when Disney has predicted the service will become profitable. More subscribers likely means the service will be profitable sooner. 

At more than 60 million subscribers for Disney+, Disney has reached escape velocity. It’s hard to imagine a scenario where Disney+ isn’t part of your complete streaming breakfast in the new media world

That means Disney has entered a new phase — one that is about retention of subscribers as much as it’s about adding new ones. Netflix has been in this phase for years.

Don’t get me wrong — both services are still in global growth mode. Disney+ isn’t even in a bunch of European countries yet. But Disney can start focusing on building out the service with new content beyond its reliable family-friendly library movies and shows. That focus is a huge advantage over AT&T’s HBO Max, Comcast‘s Peacock and ViacomCBS’s whatever-the-name-is-going-to-be, which still have to think about distribution (like Peacock and HBO Max getting on Roku and Amazon Fire TV), marketing, name recognition, branding and bundling partnerships to boost subscriber numbers to placate Wall Street.

The Disney+ advantage

A few things worth highlighting: First, it’s not that easy to get subscribers. Just ask Quibi. HBO Max signed up about 4 million new subscribers in its first two months. Compare that to Disney+, which signed up about 10 million in its first 24 hours. LightShed analyst Rich Greenfield noted that it to add just 13 million subscribers.

Second, we’re in a pandemic. As expected, we’ve seen a surge in subscriptions with people stuck at home. Netflix added 26 million new paid subscribers in the first two quarters compared to 28 million subscribers for all of last year. 

Third, Disney+ had a unique one-off in July with the exclusive release of the hit musical “Hamilton.” That may have pushed several million new subscribers toward the service in July. Whether or not those subscribers actually stay with the service is an open question. Also, it’s worth noting that a bunch of those Disney+ subscribers are actually India Hotstar customers rolled into Disney+. Verizon customers also get Disney+ for free for a year.

And fourth, it seems clear that streaming companies across the board were far too conservative with subscriber estimates. Even in November, it wasn’t clear how quickly the media world would embrace streaming video. Since Disney+’s launch, NBCUniversal made the decision to offer Peacock for free to all users, ViacomCBS decided to amplify its streaming service rather than focus only on licensing content to rivals, and HBO Max decided to price its service identically to “regular” HBO to drive subscribers to the product. Peacock, for example, has already added 10 million signups despite launching nationally just a few weeks ago. NBCUniversal predicted 30 million to 35 million people would sign up by 2024. Since Peacock is free, the service should easily hit that target years before 2024.

But it’s been clear from the service’s launch that Disney+ was primed to succeed. Pricing the service at $6.99 per month for an enormous back catalog of hit movies from Disney Studios, Pixar, Star Wars, Marvel and hit shows like “The Simpsons” was a clear value proposition win. Obviously, consumers have agreed.

If there are only going to be four to six streaming services that can work as broad offerings, Netflix is one. Disney+ is two, and Amazon Prime Video is probably three, given Prime’s shipping and other benefits. That means there are two or three more slots for Hulu, Apple TV+, Peacock, HBO Max and ViacomCBS

The Streaming Wars have truly begun. 

Disclaimer: Comcast owns NBCUniversal, the parent company of CNBC.

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