Netflix vs. Disney: Which Streaming Stock Is the Real Content King?

The rapid introduction of multiple streaming services has caused a lot of grief for Netflix (NASDAQ: NFLX), as is evident from its loss of over 1 million subscribers in the first half of 2022. The company is also suffering losses in content as its competitors pull licensed titles from the service to fuel their own newly launched streaming platforms. While it looked like Netflix Originals were safe, more of the company’s content could be in jeopardy than most realize. Let’s assess.

Netflix loses, while Disney gains

In April 2015, Netflix premiered its original series Daredevil — based on Marvel comics. The company then released several additional connected series, including Jessica Jones, Luke Cage, Iron Fist, and The Punisher. The shows had multiple interconnected series, culminating in a street-style Avengers series aptly named The Defenders, which brought the heroes together. Netflix built up a large fanbase for the New York City-based shows and then, in late 2018, promptly began canceling the series one by one, to the dismay of their fans. 

The cancelations occurred in the run-up to the launch of Disney‘s (NYSE: DIS) streaming service, Disney+, in November 2019. While Netflix marketed The Defenders-related shows as Originals, they were based on borrowed characters and thus removed from the service on March 1, and are now exclusive to Disney+. The move has shown that Netflix’s past style of developing originals alongside major studios is no longer viable.

Additionally, on July 24 Marvel announced an extensive slate of upcoming releases, with a new Disney+ show titled Daredevil: Born Again due to premiere in spring 2024. The show will star Charlie Cox in the title role and Vincent D’Onofrio as the villain, both having featured in the Netflix series. While it’s uncertain how much of the story will continue from where Netflix left off, the show has already garnered plenty of excitement from fans of the 2015 series. 

In continuing Daredevil‘s story, Disney can build on a world that Netflix brought back into the mainstream. Meanwhile, Netflix continues to flounder as its content losses grow. 

The hits that keep coming

Since 2015, Netflix’s content library has shrunk by 35% and its film library is 55% smaller. Significant losses such as Friends in 2020 and The Office in 2021 have been highly publicized. And now, with its 2022 loss of Criminal Minds, Netflix has lost its top-performing shows three years in a row as licensing deals ended. While these losses came as little surprise in light of the ongoing streaming wars, observers may be unaware of just how many Netflix Originals are also in jeopardy.

The company has a long history of teaming up with major studios to produce content. Its first original series, 2013’s House of Cards, kicked off the company’s venture into original content, but Sony actually owns its distribution rights. The Japanese company hasn’t shown interest in developing a streaming service yet and currently has a deal that gives Netflix streaming rights to many of its new movies, but that doesn’t mean the company won’t launch a competing platform in the future. If this were to happen, Netflix could lose some of its major original series, such as Cobra Kai, Atypical, Bloodline, its massive hit The Crown, and several more.

Moreover, whereas companies such as Disney and Warner Bros. Discovery produce and distribute their own content, Netflix has often relied on outside studios for production. As a result, the company’s content can fall under licensed titles, licensed originals, and true originals. Popular Netflix series such as You and Orange Is the New Black are actually licensed originals and have the potential to be pulled someday.

How can Netflix safeguard its content?

As Netflix moves away from the content aggregation style that made it big, it will need to shift focus from licensing agreements to content production. Major players in the streaming industry, such as HBO Max and Disney+, have the advantage of owning a massive library of films and series. However, Netflix only moved into content production in 2013 and has much catching up to do. 

Self-producing content may require a more significant investment than licensing from a studio, but it will be better for Netflix in the long run. Netflix will save money on renegotiating deals with production companies every few years and will be in complete control of its content. Thus, subscriber satisfaction will increase as consumers can trust their favorite titles will remain on the platform.

When Netflix next releases a hit on the level of Stranger Things or Squid Game, investors should find out its production origins. If the series is truly a Netflix Original, then the company will be on the right track with its content needs. 

Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends Warner Bros. Discovery, Inc. and recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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