for every piece of content that Netflix either licenses or self-produces, it pays a fixed dollar amount regardless of how many people watch it or how many subscribers the company has. Netflix pays for its single largest expense – content – on a fixed cost basis, i.e. Additionally, Netflix is also trying to close its net income margin gap with Disney, as can be seen with its margins having consistently gone up in recent years. But Netflix seems to win this race as it is entirely focused on streaming with no other business division being hit by the pandemic. This is where Disney+ is proving to be a saving grace for Disney during this difficult time. The lock down and home confinement of people has increased demand for streaming services. Additionally, with new film production having halted and advertisers unwilling to spend much, the company’s studio revenue is also likely to be affected in 2020. The current lockdown in almost all major cities due to the coronavirus pandemic has led to a virtual shut down of almost all its parks & resorts, thus severely hitting its top line. Over the years Disney has increased the share of parks & resorts in its total revenue from 31% in 2014 to 38% in 2019. Disney+ (Disney’s streaming platform) was launched in November 2019 and streaming is expected to contribute 15%-20% of Disney’s revenues in 2020. While Netflix’s revenue is almost entirely contributed by streaming services (US and international), Disney is a much more diversified company, with operations ranging from cable networks, parks & resorts, merchandise & consumer products, studio, etc. The two companies have become competitors since the time Disney has entered the streaming war. Let’s have a closer look at the core business prospects.
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