Case Question

E-commerce 2021: business. technology. society. KENNETH C. LAUDON AND CAROL G. TRAVER

video case chapter 10 Online Content and Media case 10.1 Disney+

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summary As streaming services continue to replace traditional television viewing, traditional content creators like Disney, HBO, and Comcast NBCUniversal, as well as tech giant Apple, have begun to launch their own proprietary services to compete with Netflix. L: 10:12

case For years, online content streaming services have been growing at the expense of traditional television viewing. While overall media consumption hours have remained steady, the use of Internet-connected devices and smart TVs to view streaming content is rising rapidly, while time spent viewing live TV continues to drop, according to Nielsen. In 2020, there were more subscribers of video streaming services than viewers with a cable connection. Netflix has long been the king of streaming services, with more than 195 million subscribers worldwide as of the third quarter of 2020, and thousands of hours of streaming content, including hundreds of original shows developed exclusively for its own platform.

Copyright © 2022 Kenneth C. Laudon and Carol Guercio Traver. This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work in any form, including online, for any other purpose is not permitted. This work should not be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor its pedagogical purpose.

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However, Netflix’s continued dominance in the content streaming market is far from assured. It has encountered resistance from third-party content creators, who have begun to demand increasingly large fees for the rights to license their content. Netflix has also sought to offset the rising costs of both licensing and developing its own content by raising the price of its most commonly used subscription plan. After the company’s fifth price increase within the last five years in 2019, Netflix experienced the first decrease in the number of its US subscribers since 2011. This resulted in a tumble in its stock price as investors fretted that the company might finally have pushed its prices too high.

Another significant threat to Netflix’s ongoing dominance is the increasing number of competing streaming services launched in recent years, including Hulu and Amazon Prime Video. Still, Hulu has roughly 35 million total subscribers, a far cry from Netflix’s 195 million. Perhaps more troubling for Netflix is the rise of content creators pulling their content off Netflix’s platform and moving it to their own proprietary services. This is what Disney has done with the creation of its Disney+ streaming service. Disney joined other companies who have already launched similar services, such as Time Warner’s HBO GO for HBO content, CBS All Access, and Comcast’s Xfinity streaming service. These services have also been joined by HBO’s new service HBO Max, and Comcast NBCUniversal’s Peacock).

INetflix’s decision to develop an increasing amount of its own content makes more sense in light of this trend. Disney in particular boasts an incredibly diverse array of television and movie franchises, and the departure of that content from Netflix and other platforms will be a significant loss for Netflix subscribers. From Disney’s perspective, convincing Netflix subscribers to abandon that platform for Disney+ is somewhat unlikely; but they may be able to convince many viewers to subscribe to both services concurrently. In the future, as more companies create their own streaming platforms, most content consumers will be forced to make tough choices about which services they subscribe to.

Copyright © 2022 Kenneth C. Laudon and Carol Guercio Traver. This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work in any form, including online, for any other purpose is not permitted. This work should not be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor its pedagogical purpose.

video case questions

1. Which of the new services has the best chance of being successful, and why?

2. What does cable still offer that streaming services do not?

3. What kind of approach is NBCUniversal taking?

4. What kind of content will HBO Max offer?

5. What will be the initial price of a yearly or monthly subscription to Disney+?.