The Economist February 12th 2022 53
BusinessTelevision
To the victors, the scraps?
A
teenaged girl who periodically
transforms into a giant panda is the
improbable star of “Turning Red”, a com-
ing-of-age movie from Disney due out next
month. The world’s biggest media compa-
ny, which will celebrate its 100th birthday
next year, is no adolescent. But Disney is
going through some awkward changes of
its own as it reorganises its business—
worth $260bn—around the barely two-
year-old venture of video-streaming.
So far the experiment has been a suc-
cess. Its streaming operation, Disney+, ini-
tially aimed for at least 60m subscribers in
its first five years, ending in 2024. It got
there in less than 12 months, and now
hopes for as many as 260m subscribers by
that date. Bob Chapek, who took over as
boss just before the pandemic, is con-
vinced that Disney’s future lies in stream-
ing directly to consumers, his “north star”.
On February 9th the company reported that
Disney+ had added a healthy 11.8m sub-
scribers in the latest quarter, shoring up its
position as one of the most likely survivors
of the ruthless contest that has become
known as the streaming wars.
But doubts are surfacing across the in-
dustry about how much of a prize awaits
the victors. Every year Disney and its rivals
promise to spend more on content. And yet
even as costs rise, the growth in subscrib-ers is showing signs of slowing. A realisa-
tion is setting in that old media companies
are pivoting from a highly profitable cable-
television business to a distinctly less re-
warding alternative.
Markets took fright last month when
Netflix, the leading streamer, forecast that
in the first quarter of 2022 it would add just
2.5m new members. That would be the
weakest first quarter since 2010, when
most Netflix subscribers still got dvds by
mail. Its share price fell by more than a
quarter on the news. Disney shares rallied
this week following its earnings report,
which soundly beat expectations.Yet in
the previous quarter Disney+ had added
only 2.1m members, the least in its short
existence. With some exceptions, stream-
ers’ breakneck growth seems to be slowing.
The firms blame temporary headwinds:
a covid hangover, content delays and, in
the case of Apple tv+, the phasing out of
free trials. But some analysts are conclud-
ing that the ceiling for subscriptions is
lower than they had thought. Morgan Stan-
ley reckons Netflix will end 2024 with
260m global members, down from the in-
vestment bank’s earlier estimate of 300m.
And though streamers see the potential to
raise prices in rich-world markets, that will
be harder in the faster-growing poor ones.
In India, Netflix recently cut the price of itsNever mind who is winning the streaming wars. Investors are terrified that the
prize may not be worth it
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