The Walt Disney Co. continues to ramp up its aggressive posturing with competitors as it approaches the November launch of its streaming service Disney+.
Disney is barring Netflix Inc. advertisements across its networks and platforms, The Wall Street Journal recently reported. The ban, which reportedly includes all Disney broadcast and cable networks, except ESPN channels, is likely more symbolic than impactful on financials or operations, streaming analysts said.
Marketing expenses
Netflix's marketing has not shown a direct correlation with its subscriber growth, according to S&P Global Market Intelligence data. Each quarter in 2018 the company raised its marketing spend deeply into the double digits year over year, with marketing expense growth topping out at 90.3% in the June 2018 quarter at $592.0 million. Average paid memberships for that 2018 quarter grew 26%, up 5.2 million, but missed the company's guidance of membership growth of 6.2 million.
Executives explained that the marketing push in 2018 represented a "trial and error" with different ways of creating buzz around certain titles, including social campaigns.
"It was just a really incredible kind of global experience that happens all at once with very little marketing spend," Chief Content Officer Ted Sarandos said of the social media buzz surrounding Netflix original film "To All the Boys I've Loved Before," for example. "So the question would be, if we had put a bigger marketing spend than that, would that have been an even bigger event? So it's really just trial and error."
For the June quarter 2019, the company reported its first quarter of negative streaming membership growth in the U.S. and missed its 5.0 million membership-additions guidance by 2.3 million. The company's marketing expenses during the quarter totaled $603.2 million, representing growth of just 1.9% year over year.
For its part, the company pointed to factors such as pricing, seasonality and its content slate as reasons for the results.
"In places where we increased prices we did see elevated churn rates and lower retention," CFO Spencer Neumann said on the earnings webcast discussing the numbers. "We think the primary story was around seasonality and timing and nature of our content slate, but pricing played a factor."
Disney impact
Dan Rayburn, streaming media consultant and principal analyst for Frost & Sullivan, does not think Disney's move will impact Netflix or Disney much.
"Netflix doesn't buy a lot of ads across Disney sites," he said in an interview.
He also does not believe Disney's upcoming streaming platform, priced at about half the cost of Netflix, will impact Netflix significantly. TV shows and movies are like cars, and a sedan is not in direct competition with a pickup truck, Rayburn said. It just depends on the needs and preferences of the buyer.
Further, Disney's low price point should not force consumers to discontinue Netflix to pick up Disney+, he said. Considering the affordable cost and the unique programming, "Why wouldn't you have both?" Rayburn said.
Disney has taken other aggressive moves ahead of its Disney+ launch, including Disney CEO Bob Iger's resignation from the board of Apple Inc. on the day Apple announced the launch date and price of its streaming service Apple TV+. Disney is also reportedly sparring with fellow streamer Amazon.com Inc. over terms related to Disney apps on Amazon Fire TV devices.
Fitch analyst Patrice Cucinello said Disney's posturing will likely create a level of hype around streaming competition that actually benefits all the platforms involved.
"It creates a level of fanfare and attraction," the Fitch analyst said in an interview. "It's exposure for [Disney], but do I think it moves the needle on [Netflix's] subscriber growth? No, not really."

