Disney versus Netflix: The AVOD battle


For years, Netflix was the king of the streamers, enjoying a near-monopoly of the streaming market and steady growth of its subscriber growth across the world. Recently, however, it has come against increasing competition from the likes of Amazon Prime, Peacock, HBO Max, Apple TV and especially Disney+. Disney+, The Walt Disney Company’s streaming platform, has enjoyed stratospheric growth over the last few years, and its results so far this year far outshone Netflix’s. With both platforms taking their offering to the next stage later this year by launching their ad-supported tiers within weeks of one another, we look at the state of play and explore what the war between the platforms means for advertisers.

2022: The year Disney’s long-term plan paid off

The growth of Disney+ into one of the biggest streaming platforms in the world may seem like a recent phenomenon but it is the result of a carefully thought-out, 15-year-long strategy to reinvigorate the Disney empire. Of course, there were other factors at play; a global audience primed by Netflix for streaming, and the serendipitous launch of Disney+ just as the world went into lockdown and people were eager for entertainment and relief. But content is king when it comes to winning in the streaming industry, and that has been Disney’s relentless focus since the mid-2000s. Major acquisitions have included Pixar in 2006, the Marvel Comics superhero universe in 2009, George Lucas’ Lucasfilm (including the Star Wars franchise) and 21st Century Fox in 2019 (which included operational control of Hulu). The resulting content base was ripe for the launch of Disney+ and, with content that was so much more famous and abundant than Netflix’s, it’s not surprising that Netflix is struggling to keep up.

The rise and rise of Disney+

As already mentioned, Disney+ benefited from the fortuitousness of launching an on-demand streaming platform precisely at a time when people needed at-home entertainment more than ever before. But even taking that into consideration, its growth has been remarkable. It had reached 100 million subscribers just two years after launch, far exceeding its goal of 60-90 million users by 2024. By comparison, it took Netflix a decade to reach 100 million subscribers, despite a much less competitive market – although it was also creating that market as it went along. Recently, there have been concerns among investors that the streaming industry is slowing down – concerns that were fuelled by Netflix’s results in the first two quarters of this year. But Disney has defied these worries: subscribers to Disney+ reached a new high of 152 million in the third quarter of this year, having added a remarkable 14.4 million in the second quarter. When the Disney+ tally is added to subscriber numbers for Hulu and ESPN, the total number of subscribers for platforms owned by The Walt Disney Company amounted to 221 million, surpassing that of Netflix.

Netflix’s struggle to stay ahead

Netflix is still the single biggest streamer, with just over 220 million subscribers, but 2022 has been a difficult year for the company. Their numbers seem to be following a pattern of stagnation, losing 200,000 in Q1 and a huge 970,000 in Q2. They are of course at a different developmental stage to Disney+, and at least part of Netflix’s stagnation is down to saturation as well as other factors such as the rising cost of living and the end of lockdown restrictions. However, content is also an issue: Netflix does not have a back catalogue of the scale of Disney’s, and Disney and many other media companies are ending the licensing of their content to Netflix so they can use it on their own platforms.

Netflix’s challenges and its disappointing results earlier this year prompted it to announce that it would be introducing an ad-supported tier to its platform. This caused ripples of excitement across the advertising industry, which has always been eager to target audiences which can otherwise be hard to reach. Netflix had been planning to launch the new AVOD platform in early 2023 but when Disney+ threw its hat into the ring with a launch date of 8th December, Netflix brought its launch forward to early November.

Disney versus Netflix AVOD: The clash of the titans

So, Netflix and Disney+ are going head-to-head with launches of their AVOD platforms within weeks of one another. This will be an exciting and transformative time in the advertising industry: a sizeable proportion of Netflix’s audience, for example, is notoriously difficult to reach via other channels. So, what will advertising on these platforms entail? As things stand, we know more about Netflix’s proposed offering than Disney+, although we do know that both are anticipated to have a light ad load, with about four minutes an hour for TV series. Disney is expected to start with 15-30-second spots, but will expand to a ‘full suite of products’ over time.

While Disney+ executives will be able to rely on the company’s past experience with advertising, both on cable TV and on other platforms it owns. For Netflix, however, this is fresh territory – although they have hired experts with plenty of advertising experience, and have partnered with Microsoft to build their AdTech capabilities.

There has been more reporting on Netflix’s proposition. In early September, ad buyers were asked to submit initial bids, with a ‘soft’ CPM of $65, well above the industry average CPM of under $20, and similar to premium NFL CPMs. Netflix is asking advertisers to make a $10 million annual commitment, but with limited targeting: during the first phase, brands will be able to buy against top viewed series and some content genres, but not against geography (except country), age, gender, viewing habits or time of day. Movies are expected to have pre-rolls only, and frequency capping will be low by industry standards – one per hour and three per day.

Challenges ahead

By launching their ad-supported tiers within weeks of each other, the two biggest global streaming platforms are going head-to-head in a new field. They are facing a difficult market: with rising inflation and the growing cost of living, consumers will be looking to make cuts, and streaming subscriptions may be seen as a luxury. Of course, the streaming giants will be hoping that the introduction of their AVOD platforms will help to mitigate this, but it won’t be easy, especially if they are to avoid cannibalization of their premium, ad-free tiers. It will be fascinating to see who plays the AVOD cards better.

This is an exciting moment for advertisers – not only will they be able to reach new audiences, but investment in the infrastructure around advertising in streaming will create exciting new opportunities and capabilities. The industry will look on with interest as the two companies lands on a defined pricing strategy – we will come back with analysis when it is available.


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