When it comes to competition, Netflix CEO Reed Hastings wants you to know that a rising tide lifts all boats.
That was the message from Netflix's investor call on Tuesday, where competition from Disney, Apple, and others was an elephant in the room. To much enthusiasm, Disney had rolled out its $6.99 direct-to-consumer streaming product just days earlier, while Apple unveiled its own Netflix competitor, Apple TV+, in late March. Another streaming service from AT&T's WarnerMedia is expected later this year.
Assuming a diplomatic posture, Hastings told analysts on its first-quarter earnings call that any new competition from Apple or Disney amounts to a drop in the bucket.
"On a practical basis, there's already so much competition," Hastings said. "I mean, we mentioned we only win 2% of downloading on mobile. It's like 98% of the time people are not doing Netflix. On U.S.televisions, it's 90% are not watching Netflix. So there's a ton of competition out there, and Disney and Apple add a little bit more. But frankly, I doubt it will be material, because again, there's already so many competitors for entertainment time."
Hastings was reiterating a case that Netflix has made before: That there's a whole world of entertainment options, from sports to Fortnite and any other way consumers might spend their leisure time, that new competition in streaming doesn't necessarily come at their expense.
There's another argument, though, that Netflix is starting to make and that some analysts are buying into: That the march of cord-cutting and transition from scheduled to on-demand programming cannot be stopped, and that multiple players can benefit from that secular trend as it continues to spread across the globe.
In its Q1 shareholder letter, Netflix wrote that it doesn't expect its new streaming rivals to "materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings. We believe we'll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing (similar to how US cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s)."
In a note on Wednesday, Alan Gould of Loop Capital argued that Disney+ will add new fuel for cord-cutting in general, which will help, not hurt, Netflix.
"We believe Disney's compelling offer with Disney+ will accelerate cord cutting, which will result in Netflix adding more subs from cord cutters/shavers than it loses for competitive reasons," Gould wrote.
Though estimates on Netflix's total addressable market (TAM) vary, Morgan Stanley placed it last year at approximately 660 million broadband subscribers globally. As for Disney+, Barclays placed its TAM at 455 million people globally, which would make it smaller in size but comparable to Netflix's.
In addition, given Disney's modest price point, the two may end up complementing one another, according to Pivotal's Jeffrey Wlodarczak.
"Disney's move to eventually launch Disney+ as net fundamentally positive for Netflix as we believe Disney+ is complementary (family/child focused) to Netflix and especially given the initial $7 price point is likely to drive an acceleration of consumers away from the expensive relatively unattractive PayTV," he noted.