Navigant Research Blog

Disney vs. Netflix as Analogy for Auto Incumbents vs. Uber and Lyft

Sam Abuelsamid — January 2, 2018

TV and movie businesses may not seem like the best analogy for the automotive industry and the future of transportation, but if you consider the evolving relationships, there are some fascinating parallels. The relationship between two of the world’s largest media companies, incumbent Disney and insurgent Netflix, is becoming increasingly tenuous as both look to leverage disruptive technologies. In the mobility space, we are seeing a surprisingly similar dynamic between major automakers and ride-hailing companies like Uber and Lyft, with Alphabet and Apple on the periphery of the battle.

The Evolution of Entertainment as a Service

It’s now been a full decade since Netflix began its pivot from mailing plastic discs to customers to streaming video over the internet. Until a few years ago, Netflix was completely dependent on the willingness of content creators like Disney, Fox, Warner, and others to provide the materials that it mailed or streamed to subscribers. The studios did this in exchange for licensing fees because they saw it as advantageous to get in front of viewer’s eyeballs on the new distribution channel.

At first, the number of people watching Disney content on Netflix was relatively low and the studio saw it as an interesting experiment. The revenue numbers were small and had to be split with the distributor. Now, as it has become increasingly apparent that consumers are shifting away from paying to go to theaters and paying for cable TV services in favor of direct streaming to TVs and mobile devices, the idea of splitting that revenue pie has lost its appeal.

Disney’s Step into the Streaming World

Thus, over the course of 2017, Disney announced that it will launch at least two of its own streaming services, a sports oriented channel for Disney-owned ESPN, and an entertainment channel. When the latter launches in 2019, much of the Disney content that has been so popular with viewers will disappear from Netflix, including Marvel and Star Wars. Disney acquired a controlling interest streaming technology company, BAMTech, and its late 2017 bid for much of Fox’s entertainment business will give it control of rival streaming provider Hulu.

Meanwhile, Netflix has been reacting by investing billions of dollars in creating its own catalog of proprietary content. While the company has managed to generate net profits, it has also been burning cash at the rate of nearly half a billion dollars per quarter. As content from Disney and other studios disappears over the next couple of years, Netflix is likely to struggle to retain subscribers and its financial position may get significantly worse.

How Will the Auto Industry Respond to the as a Service Momentum?

Meanwhile, in the transportation space, ride-hailing providers have grown at an even faster pace than Netflix while continuing to lose billions of dollars per year. Automakers have taken note of the growing popularity of mobility as a service and see the threat to their core business of selling cars, just as streaming has eaten into Disney’s core distribution channels.

Most of the big automakers are actively developing ridesharing services that will increasingly leverage disruptive automated vehicle technologies. Just as Disney no longer sees the need to share the revenue from its creations with Netflix, GM, Daimler, Ford, Volkswagen, and others may eventually want to stop giving Uber, Lyft, and Didi a cut and instead compete with them directly.

Navigant Research’s Mobility as a Service report projects annual ride-hailing revenue of nearly $1.2 trillion globally. An ever increasing proportion of that is likely to go to the companies that build the vehicles that move people and goods as well as those that operate their own services.

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