What a Disney+-Hulu-Max Bundle Would Mean for Netflix


Key Takeaways

Disney and Warner Bros. Discovery announced a streaming bundle in what an analyst told Investopedia seems like “a last-ditch effort” to compete in the streaming market already dominated by Netflix.The bundle, which includes Disney+, Hulu, and Max, may help the companies improve consumer value, drive revenue, and better their competitive position.Netflix reported having 269.6 million subscribers, more than Disney+, Hulu, and Max membership numbers combined, according to company reports. Netflix is the “gold standard” of streaming, Disney CEO Bob Iger has noted, and analysts said the streaming pioneer is unlikely to be dethroned from its top position.

Disney (DIS) and Warner Bros. Discovery (WBD) teamed up this week to launch a new streaming bundle, the latest move by the legacy media giants to compete in the Netflix (NFLX)-dominated streaming space.

The joint package, which will include Disney’s Disney+ and Hulu, as well as Warner Bros. Discovery’s Max, is set to be available in the U.S. in the summer. The companies didn’t provide an exact timeline or pricing information for the bundle.

JB Perrette, CEO and President of Global Streaming and Games at Warner Bros. Discovery, called the new offering “the best value in streaming” for consumers, adding it “will help drive incremental subscribers and much stronger retention.”

Disney recently launched Hulu on Disney+ for Disney Bundle subscribers, which analysts expect to positively contribute to the company’s streaming segment.

Why Companies Are Bundling Streaming Offerings

The new Disney+, Hulu, and Max package is launching at a time when consumers are looking to maximize value, and as media firms grapple for ways to improve their competitive positions in an increasingly crowded field of streamers.

Consumers get something close to the traditional cable TV package from a bundle as opposed to having to subscribe to multiple streaming platforms.

“It’s no surprise, really, that you’re seeing a return of a bigger bundle to help ease consumers’ concerns and challenges around fragmentation” of streaming services, Paolo Pescatore, a media analyst at PP Foresight, told Investopedia.

Media companies, meanwhile, have struggled to boost their streaming revenue, facing few options beyond raising prices, which consumers have pushed back against.

Still, media firms that have long been rivals in their traditional businesses may not find teaming up trouble-free. Pescatore noted that investors should not “underestimate how challenging” it is for “these media giants [to collaborate] on a common goal.”

Disney+, Hulu, and Max Subscribers Combined Still Lag Netflix

These bundles are coming into a market where Netflix, the pioneer in streaming, dominates the industry by a long stretch.

“There are too many players chasing too few dollars,” Pescatore said, adding that the bundle “almost feels like a last-ditch effort to revive [the companies’] fortunes in the streaming-led TV world.”

Netflix already has more subscribers than Disney+, Hulu, and Max combined, data from the companies’ recent quarterly reports show.

Netflix said it had 269.6 million global streaming paid memberships in its most recent earnings report. In contrast, Disney recently reported 117.6 million Disney+ Core subscribers, excluding Hotstar and ESPN members, and 45.8 million Hulu subscribers, without including live TV members. Warner Bros. Discovery said it had 99.6 million subscribers globally.

Unlike Netflix, Disney and Warner Bros. Discovery have struggled to make their streaming businesses profitable.

Disney returned a surprise profit in its entertainment direct-to-consumer business, which includes Disney+ and Hulu, but recorded an $18 million loss overall in streaming. Warner Bros. Discovery also recorded a direct-to-consumer segment loss.

Netflix Is the ‘Gold Standard’ of Streaming

“It’s also important to note, Netflix is in many respects the gold standard when it comes to streaming,” Disney Chief Executive Officer (CEO) Bob Iger said on the company’s earnings call, explaining that what the company is building with Disney+ “is the technology that Netflix has had in place and has been building for well over a decade.”

The Disney CEO isn’t the only one to acknowledge Netflix’s edge, with analysts saying that even bundles may not be enough to win over subscribers from the streaming pioneer.

“I think you won’t necessarily see people churn from Netflix,” Pescatore said, noting that there will already be some overlap between Netflix, Disney+, Hulu, and Max subscriber bases.

‘Middlemen’ Like Roku, Apple to Suffer from the Disney-Warner Bros. Bundle

CFRA analyst Kenneth Leon wrote in a note recently that the bundle is likely to “drive revenue sharing, reduce customer churn,” but ultimately cut out “middlemen” like Roku (ROKU) or Apple TV (AAPL), rather than impact Netflix.

Third Bridge analysts said “experts warn that the short-term drive to make [the streaming] segment profitable is coming at the expense of long-term growth” for Warner Bros. Discovery.

While the bundle “potentially paves the way for some mammoth joint venture in an effort to curb costs,” Pescatore struggles to see the package paying off into a “huge spike in subscribers” for Disney and Warner Bros. Discovery or really even “move the needle” in the race against Netflix.



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