Netflix v Disney: which should you invest in? – The Times

Netflix v Disney: which should you invest in?It’s one thing to argue over which streaming service to opt for at home, but quite another to decide which of these entertainment giants is best for a long-term investmentILLUSTRATION BY JAMES COWENHolly MeadSunday May 18 2025, 12.00am, The Sunday TimesThere is a debate raging in the Mead household: Netflix or Disney+? As a fan of the TV series Black Mirror and of endless Friends reruns, I prefer the former. But my husband, who had been eagerly anticipating the second series of the Star Wars spin-off Andor, is team Disney.Shelling out for both would be pointless because we watch so little TV. How should a customer decide which is best — and what about an investor?The days of event television are gone. No longer must we wait until 7.30pm on a Friday night to find out who shot Phil Mitchell. These days entire series are “dropped” and the biggest films of the year often bypass the cinema entirely.• Six ways to invest with little moneyFor investors considering how they might capitalise on that trend, Disney and Netflix are two obvious places to look. A stalwart and an upstart, each trying to broaden their reach and jostle for position as top dog in the world of entertainment.AdvertisementWalt Disney was founded in 1923 as an animation studio and Netflix in 1997 as a DVD rental company. Disney has since released more than 130 movies, operates 12 theme parks across six locations, six cruise ships, and hundreds of Disney stores.Netflix meanwhile, has moved away from the now-obsolete DVD market, and in 2007 launched its streaming service, with a library that today contains at least 5,000 movies and 2,500 TV shows.They are some of the biggest companies in the world, with Disney worth $200 billion and Netflix $485 billion, but it’s been a rollercoaster ride to get where they are today. Disney revenues increased by 7 per cent last quarter to $23.6 billion, according to its latest results, published this month. Operating income was $4.4 billion, up 15 per cent from a year ago. Disney+ subscribers grew by 1.4 million to 126 million, and total subscribers reached almost 181 million including its other platform, Hulu.Away from streaming, sports advertising (Disney owns the US network ESPN) grew by 29 per cent. Experiences, including theme parks and consumer products, brought in operating income of $2.5 billion, but its cruise division made a loss.AdvertisementRobert Iger, its chief executive, called it “an excellent first half of the fiscal year”.Netflix, which published results in April, saw revenue for the quarter increase 13 per cent from the same period a year ago, and operating income reach $3.3 billion. It now has 300 million subscribers worldwide.The first three months of the year brought hits including Adolescence, which chalked up 124 million views, and the film Back in Action, starring Cameron Diaz and Jamie Foxx, with 146 million views.The firm is moving into live sports streaming. WWE Raw, the wrestling series, is a regular hit and key sporting fixtures for the year include the Taylor v Serrano women’s boxing rematch in July and an NFL game on Christmas Day. It will look to expand live events coverage to other countries in time.“We are investing in big, can’t miss, special events,” the company said. AdvertisementDisney was undoubtedly late to the streaming party, launching its platform only in 2019 — a full 12 years after Netflix. But it is learning from its rival and was quicker to bring in advertising, which launched on the platform in 2022.Is Netflix also taking lessons from Disney? The company is dipping its toe into gaming, merchandise and live experiences. Its Squid Games: The Experience immersive event now operates in New York City, Sydney and Seoul, and comes to London this month.The two platforms have similar pricing models, but Netflix makes more money simply because it has more subscribers. Disney+ costs £8.99 a month for a standard plan, £12.99 for premium, or £4.99 a month with ads. Netflix is £12.99 a month for standard, £18.99 for premium and £5.99 with ads.Advertising has become an important revenue stream. You might think the companies want more people to pay for premium packages, but actually the more subscribers they have on the basic plans, the more they can make from ads.There have been stumbling blocks along the way.AdvertisementNetflix took a hit in 2022, when subscriber growth stalled and it announced plans to introduce advertising. Some questioned whether the entertainment market was too saturated, and if a cost of living crisis could result in subscribers turning away. Users were unhappy with a clampdown on password sharing. The share price fell from about $678 to $190. Today it trades at about $1,138 and is up 150 per cent over five years.Disney, meanwhile, has been grappling with succession issues. Iger stepped down as chief executive in 2020 after 15 years, but came back in 2022 when his successor was removed. He has agreed to stay until 2026, but no replacement has yet been confirmed. Such uncertainty can bruise investor confidence. Its share price has been on a mostly downward trajectory since early 2021, when shares peaked at about $197. Today they trade at $111.Both firms have also made missteps with their content. “Netflix was on a mission to hoover up as many new subscribers as possible, but had got to the point where it was creating content with a focus on quantity rather than quality,” said Daniel Coatsworth from the investment platform AJ Bell. “And Disney had some real howlers at the cinema, particularly with some of its live action versions of classic films.”• Revenue rose at Disneyland Paris, so why did profits halve?Who backs Disney? It is a top holding in the £4 billion Lindsell Train Global Equity fund, accounting for 4.4 per cent of assets. Madeline Wright, deputy portfolio manager of the fund, said the company was making “significant progress” in streaming. “We continue to prize Disney for its ownership of rare and uniquely valuable entertainment content — a stable of utterly irreplaceable intellectual property known around the world,” she said.AdvertisementGerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund, invested in Disney about eight years ago, attracted by its expansive library of content. “It was difficult for others to compete with its back catalogue,” Smit said. But he lost conviction when the company took on debt to fund the buyout of Fox in 2019.“Meanwhile, Netflix was very actively building its streaming business. We realised that Netflix would be stronger on streaming and that Disney was becoming quite a capital-hungry business,” Smit said.Because while making top-quality content isn’t cheap, neither is building cruise ships and theme parks. Disney will this year launch two new ships, including the $1 billion, 1,200-room Disney Treasure, and this month confirmed plans to