Disney’s Move to Ban Netflix Ads Shows Just How Serious the Streaming Wars Are About to Get

Disney’s Move to Ban Netflix Ads Shows Just How Serious the Streaming Wars Are About to Get

If you had any doubts that the streaming war was heating up, look no further than the "happiest place on earth," where it's increasingly lookin

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If you had any doubts that the streaming war was heating up, look no further than the “happiest place on earth,” where it’s increasingly looking like a battle is brewing. By the time it launches next month, Disney+ will join a crowded space that includes Netflix, Hulu, Amazon Prime, and newcomer Apple TV+, and Disney is wasting no time making it clear that it plans to fight. 

On Friday, The Wall Street Journal reported that Disney plans to block all advertising by Netflix on all of its channels (except ESPN). That comes after Disney’s Chairman and CEO, Bob Iger resigned last month from Apple’s board of directors. Disney had planned to block ads from all of its streaming competitors, though Apple TV+ and Amazon Prime Video appear to have avoided the ban. Hulu is already owned and controlled by Disney. 

Netflix hasn’t been afraid to spend money on advertising, with the Journal’s report noting that company spent $1.8 billion on ads last year. With Disney’s move, however, those ads will no longer be shown on channels like ABC or Freeform, which could offer content that will be shown on Disney+.

Why does streaming matter?

It’s actually a really interesting battle when you consider that Disney is the world’s largest content creator, and Netflix is the world’s largest streaming video platform. For years, neither strayed into the other’s turf, which made sense considering the significant costs involved with both producing high-quality content and distributing it to viewers. 

That all changed as the technology became more accessible and content creators recognized that they could better leverage their own audiences and cut out third-party platforms like Netflix. Recognizing what was happening, Netflix began spending massive amounts of money to produce its own content and take on Hollywood’s legacy creators. 

But, you might be curious as to why these companies care so much about streaming. Why is the battle over where you stream Frozen or Friends such a big deal? The simple answer is that it’s where customers increasingly are. 

At the same time, there’s only enough room for so many streaming services in a family’s budget, and, at some point, consumers are likely to say “enough is enough.” Which explains why this fight is getting uglier. Every service is doing what it can to sign up customers, including taking direct shots like blocking all ads from competitors. 

Who wins?

Netflix has the clear advantage despite the fact that it reported a loss in US subscribers last quarter, for the first time ever. In fact, I wrote about how downloads for the Netflix app are up as the most recent season of Stranger Things dropped last month. Netflix has a much larger subscriber count than any of its competitors, and it has clearly shown that it’s capable of creating high-quality content. It’s also gone after top-notch talent to further develop original content.

Disney, on the other hand, has what is probably the most valuable library of content anywhere, including its classic animated films, Pixar, Marvel, and Star Wars. Because of that, it also has the most to lose. There’s certainly a good possibility that many families will pay the $5.99 to subscribe to Disney+ to get access to that content, but there’s no guarantee. 

To get there, Disney is not only giving up the money Netflix might’ve paid to show ads, it’s giving up a reliable stream of licensing payments to host its content on a competitor’s platform as well. At the same time, Disney is taking on all of the costs associated with building, maintaining, and marketing a brand new streaming service.

Of course, Disney can afford to make that investment. What it can’t afford is to lose this war.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

This article is from Inc.com

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