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Executive Summary Founded in 1923, the Walt Disney Company is recognized as one of the world’s largest entertainment companies. Since its inception, Disney has grown at a rapid pace within the entertainment industry through the production of television programs, feature films as well as amusement parks. Throughout its growth, Disney has acquired a number of different brands including ESPN, ABC, Marvel Studios, Pixar, and Lucas Film Ltd (The Walt Disney Company, n.d.). In 2018, Disney to earn $59.4 billion in revenue and $13.1 billion in net income (The Walt Disney Company 2018). The focus of Disney’s global expansion is linked to their Direct-To-Consumer and International business segment. This segment of Disney in particular is where the company can truly leverage their brand recognition and content to globally expand into international markets through their recent acquisition of Hulu and launch of Disney+ streaming services. Currently, Hulu is not offered in locations outside of the United States and Disney+ will initially be exclusive to the United States as well. In order to compete with other streaming services such as Netflix, which operates in 190 countries, Disney must focus on the expansion of this business area to retain a respective market share (Brennan, 2018). The model for this business segment will strictly be buyer to consumer (B2C) as it relies on personal use of the technology. The target buyers for this business area will be anyone with internet connectivity. In order to subscribe and stream content, users must have access to a screened device as well as the ability to connect to the service’s website or application. In order to operate in a foreign country, Disney must ensure that they have the proper technological infrastructure in place. Currently, Netflix is the leading streaming provider in Mexico and there are currently not many other major competitors. Disney will be able to compete with Netflix in Mexico through brand loyalty with content on Disney+ and through original content created by Hulu. They will also be able to instantly compete due to their subscription prices that fall lower for both streaming services compared to Netflix. The company will also be able to take advantage of this by bundling the two services as a subscription package. In order to ensure a smooth entry into Mexico’s market, Disney will implement a best-case competitive strategy to provide buyers with lower costs and a unique experience. As a result, Disney should expect to quickly build its user population in Mexico due to its content and subscription price.

Contents

Executive Summary i Introduction 1 Global Competitor: Netflix 1 Local Competitor: Blim 4 Competitive Advantage Evaluation 5 Recommended Competitive Strategy 7 Conclusion 7 Reference 9

Running Head: MEXICO COMPETITOR ANALYSIS & STRATEGY 1

MEXICO COMPETITOR ANALYSIS & STRATEGY iv

Introduction As Mexico continues to grow their technological infrastructure, more citizens will continue to gain access to streaming on demand platforms. In the last seven years, Mexico has been able to increase its total population’s access to the internet from under 40 percent 68 percent (Diaz, 2013). This will provide more consumers for streaming services such as Netflix and now Disney. As a result, Mexico has observed consistent growth within its SVOD segment in order to produces a total of $191 million with a total user population of 17.6 million in 2019. Following the current projected growth, Mexico’s SVOD market is predicted to generate $268 in total revenue with a total user population of 21.7 million by 2023 (Statista, 2019). The increase in users and revenue within this industry provide Disney with an ideal location for their first country outside of the United States to expand to. As Disney prepares to roll out both its Hulu and Disney+ streaming services into Mexico’s SVOD market, there are two major competitors that the company should be aware of: Netflix and Blim. Global Competitor: Netflix Netflix is currently Disney’s largest competitor worldwide. The company operates in over 190 countries and is the world’s leading provider in entertainment streaming. Their entry into the global market is one of the largest strengths of the company. In order to complete this, Netflix underwent a 3 phase global entry plan and succeeded in carrying it out. As a result they are already able to have the global recognition that other companies must still build. In order to successfully complete their plan, Netflix needed to work with country governments in order to ensure the content they offer complies with any media related laws. This not only allowed Netflix to remain in legal compliance but also promoted collaboration between Netflix and local entertainment production companies to gain access to their content as well as further understand the country’s customer base (Frue, 2018). As a result, Netflix has been able to implement content strategies for each country to maximize their ability to attract new buyers. Their efforts over the last several years has led to the company of having 7.3 million international subscribers (Brennan, 2018). In Mexico specifically, Netflix currently retains 63% of total VOD subscriptions (Martinez, 2018). The company is able to achieve this by their content libraries of both licensed and original content. One of Netflix’s biggest strengths in creating their content libraries is through the production and release of original content. Over the last five years, Netflix has quickly shifted its focus on streaming content to adding their own produced and directed entertainment. This shift has created a feeling of exclusivity amongst its buyers as the content is only available within the Netflix content. Shows such as House of Cards, Ozark, and Birdbox have allowed to streaming company to generate more sales and subscribers. After realizing the success of implementing original content, Netflix has decided to further expand this portion of their domestic business plan globally. As of 2018, Netflix was responsible for 74 percent of Mexico’s SVOD original content demand (Parrot Analytics, 2019). This year, Netflix has announced that the company is currently set to produce fifty new “series, documentaries, and films” within the next two years in Mexico (Tillman, 2019). By creating content which is created in Mexico, Netflix will be able to add additional appeal to their SVOD platform and ultimately retain a large portion of their consumer base. Another major strength of Netflix’s operation Mexico has been the company’s ability to avoid a large amount of the threats associated with conducting business in Mexico. One of the most notable threats that the company has avoided any major issues with the Mexican government. Although Mexico does not have the same censorship laws as countries like China and Russia, they are well known for political corruption. Being able to avoid any political controversy within the country has allowed Netflix to focus primarily on their success. Netflix was one of the first streaming platforms in Mexico. It has implemented translation for all of its programs which are not inherently Spanish and has been able to attract more buyers based on their language support. Overall, Netflix has many strengths and advantages to due being one of the first streaming companies in Mexico. As a result it has been able to keep its hold on a large portion of the market through the implementation of their strengths. Although their original content initiatives are a strength for the company, it is also one of Netflix’s largest weaknesses. Original content provides buyers of streaming companies with a feeling of exclusiveness since the content is only available on the streaming company’s platform. However, in the case of market leaders such as Netflix, there can be too much original content. By investing in such a high volume, Netflix is prioritizing quantity over quantity. This can degrade the reputation of their production as well as overwhelm consumers with too many options at once. Additionally, a quantity based strategy can also spread Netflix’s resources too thinly. As a result, streaming companies are unable to find the amount of experience professionals needed to produce their content. This is currently an issue within Mexico’s original content production as Netflix, Amazon and other streaming companies are all trying to fill staff their teams with professionals from the same talent pool (Tillman, 2019). Finally, investing in more content requires more capital for companies to spend. For streaming services, the primary form of income is through subscriptions. In order to generate more income to invest back in original content, Netflix and other streaming services must increase subscription prices. Originally, Netflix’s subscription was under $10, however over the last several years the company has raised prices in order to be able to support the amount of original content they are making (Frue, 2018). Local Competitor: Blim Despite Netflix’s large presence in the country, there has been other local and global streaming services to enter the market as well including a Mexico based one called Blim. In 2016 Mexico’s Telavisa launched Blim in order to attempt to compete with other providers such as Netflix. Telavisa is one of Mexico’s leading entertainment broadcasting companies and used Blim as a method to reach more consumers that are attracted to SVOD options with over 90,000 hours of Mexican programming (Vallfane, 2018). The two current strengths for Blim is the price point of the subscription and the content the company provides subscribers. As a country with a very low poverty line, Mexico’s economic environment does not make it realistic for many of its citizens to indulge in luxury items such as SVOD subscriptions. Therefore, having a lower price point is a way subscription services can attract more buyers. Blim is currently offered at cost of 109 pesos, or slightly over $5 (Bigurra, 2016). Additionally, Blim’s content library is also a strength of theirs since it will be more likely to appeal to Mexican consumers. While American content is still sought after globally, there will always be a desire for content produced in a buyer’s home country. As one of Mexico’s leading broadcast provides, Telavisa will be able to make all of their content available on Blim. The familiarity with such programs alone will attract consumers for their SVOD service. Although they will be cheaper and have more Mexican based content, Blim is still a smaller scale company in the grand scheme of Mexico’s SVOD market. The size of their market footprint is not large enough to differentiate themselves from the rest of their competition. Despite their strengths, Blim is only the third leading streaming provider in Mexico (Villafane, 2018). The size of Blim is a gaping weakness for the company; with the established presence of Netflix as well as planned emergence of Disney+/Hulu they will not be able to make a substantial competitive impact on the SVOD market but will still be successful on a smaller scale.

Competitive Advantage Evaluation Through the implementation of both Disney+ and Hulu, Disney shares many of the same advantages as Netflix. With both streaming services under its control, Disney will be able to support original content as well as provide as already made content to Mexico’s SVOD market. While Disney+ will create original content, the true strength Disney currently owns for original content lies within Hulu. Although Hulu is not available in Mexico, there original content still is demanded in Mexico; in 2018 it was determined that Hulu original content had 7 percent of the demand share (Parrot Analytics, 2019). Meanwhile, Disney+ will be used to address Disney’s biggest strength of brand recognition. Disney+ will become the sole streamer of Disney owned content including Marvel, Star Wars, and Pixar. Each of these brands as well as Disney programming are globally and will be Disney’s largest strength during their entry into Mexico’s SVOD market. Unlike Netflix, Disney’s largest weakness is that they have no experience entering foreign SVOD markets. Currently Disney has not had to deal with foreign government restrictions or laws. Although Mexico does not have any major content blocking legislation, it is prone to corruption and could be a factor during Disney’s entry. Additionally, Disney will need to add foreign language support to all of its content on both streaming platforms to ensure that they maximize the appeal it has to Mexican consumers. Disney’s largest advantage over its competitors is the brand recognition of its content. Disney owns a number of globally well-known entertainment brands and will be the sole provider of its content. Before the announcement that Disney+ would be launching, Netflix had licensed a number of Disney titles including Marvel, Star Wars, Pixar and Disney movies and television programs. After the announcement, Netflix will no longer to be permitted to air any of the titles it previously had access to. This also includes all recent and future programs that have not yet come to streaming. Based on the success of Disney content in Mexico’s all time box office gross income, it is apparent that Disney will have a market for their content that will be featured on Disney+. Currently, Disney movies represent eight of the top ten grossing box office of all time with Avengers: Endgame generating $31.9 million opening and $76.8 million total sales (Box Office Mojo, 2019). The other major advantage Disney will have over its competition will be the price it offers its services. Currently Hulu’s basic subscription is offered at $5.99 per month and is about half the price of Netflix. Users can upgrade to ad free streaming for a price similar to Netflix’s, however their basic package will appeal most to Mexico’s consumers as it rivals the price point of Blim. Disney+ will also be cheaper than Netflix and will be offered at $6.99 per month (Faughnder & James, 2019). With both services at a low price point, Disney also will be able to bundles the subscriptions together as a package deal for a discounted price to further appeal to buyers. Recommended Competitive Strategy Although very difficult to achieve at times within a competitive business strategy, Disney should pursue a best-cost strategy. Best-cost strategies are for organizations that are able to offer “both low prices and unique features that customers find desirable” (Saylor Academy, 2012). One of Disney’s biggest advantages it has within the SVOD market is the price they offer both Hulu and Disney+. Prices for each service are both well below Netflix’s subscription price and can rival lower cost local subscription services such as Blim. Additionally, Disney is in the rare position where it owns two of the most well-known services and can bundle the two together in a joint subscription package for a reasonable price. This will allow the company to appeal to financially appeal to buyers while also not impacting income. Since Disney is such a diversified company, they will not have to face the same weaknesses that Netflix has in funding large amounts of original programming. The company can leverage their brand recognition and desire for Hulu originals to generate more buyers, which will assist the company in future original content investments. Streaming companies and the industry as a whole are inherently well diversified. They provide consumers with a wide variety of programming and content to choose from. Hulu and Disney will have a unique selection of content for users to choose from because of Hulu’s original content and globally known brands featured in Disney+. By having a wide array of exclusive content between both services, Disney will be able to offer a higher volume of unique content than Netflix or other competitors. Conclusion In order to create the best chance for success during their entry into Mexico’s SVOD market, Disney must implement a best-case competitive strategy. Through the company’s ownership of both Hulu and Disney+ streaming services, Disney will provide subscribers with a diverse content library that includes Hulu originals and all major Disney brands. Additionally, the company will be able to offer both services at a lower price point than Netflix’s, while also offering subscribers with the option to buy a package subscription that includes both services. The biggest threat to Disney is the current market share that Netflix has within Mexico’s SVOD market. While there are also local competitors, such as Blim, Disney will be able to easily pass them in shares based upon content volume and quality. In order to carry out a successful best-case strategy, Disney must combat Netflix’s dominance by focusing on their brand loyalty as well as their subscription prices.

Reference

Bigurra, V. (2016 February 24). Televisa seeks to compete with Netflix and launches Blim. Retrieved from http://www.mexiconewsnetwork.com/en/news/televisa-launches-blim-streaming/

Box Office Mojo. (2019). Mexico All Time Openings. Retrieved from https://www.boxofficemojo.com/intl/mexico/opening/?sort=opening&order=DESC&p=.htm

Brennan, L. (2018 October 12). How Netflix Expanded to 190 Countries in 7 Years. Retrieved from https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-in-7-years

Diaz, L. (2013 July 15). Mexico sees $300 billion in infrastructure spending through 2018. Retrieved from https://www.reuters.com/article/us-mexico-infrastructure/mexico-sees-300-billion-in-infrastructure-spending-through-2018-idUSBRE96E0SA20130715

Faughnder, R. & James, M. (2019 April 12). Disney bets its $6.99-a-month streaming service will be a game-changer. Retrieved from https://www.latimes.com/business/hollywood/la-fi-ct-disney-plus-investor-day-star-wars-marvel-20190411-story.html

Fure, K. (2019 May 21). SWOT Analysis of Netflix. Retrieved from https://pestleanalysis.com/swot-analysis-of-netflix/

Martinez, C. (2018 May 23). Mexicans pay the most for web TV in Latin America. Retrieved from https://www.eluniversal.com.mx/english/mexicans-pay-most-web-tv-latin-america

Parrot Analytics. (2019 April 14). Mexico SVOD market share trends based on audience demand for digital originals. Retrieved from https://www.parrotanalytics.com/insights/mexico-svod-demand-market-share/

Saylor Academy. (2012). Selecting Business-Level Strategies. Retrieved from https://saylordotorg.github.io/text_mastering-strategic-management/s09-selecting-business-level-strat.html

Statista. (2019). Video-on-Demand: Mexico. Retrieved from https://www.statista.com/outlook/201/117/video-on-demand/mexico

Tillman, L. (2019 May 8). Search for Top Talent Heats Up as Netflix and Amazon Increase Film and TV Shoots in Mexico. Retrieved from https://variety.com/2019/film/news/netflix-amazon-mexico-shoots-1203206756/

The Walt Disney Company. (2018 September 29). 10-K Form. Retrieved from https://www.thewaltdisneycompany.com/wp-content/uploads/2019/01/2018-Annual-Report.pdf The Walt Disney Company. (n.d.). ABOUT THE WALT DISNEY COMPANY. Retrieved from https://www.thewaltdisneycompany.com/about/