Has Netflix Beaten Disney And HBO At Their Own Game?

One of the big challenges in 2020 for Netflix (NASDAQ:NFLX) is going to be to minimize U.S. subscriber losses. Now that Walt Disney (NYSE:DIS) has come out with its own streaming service, Disney+, the two companies will be facing off against one another. This is not the first competitor that Netflix has faced, but it's arguably the biggest one, and it's also coming at a time when some notable content is going to be pulled from its service. However, there's growing evidence that Netflix may not be in as much trouble as once feared, and that it can go toe-to-toe with Disney, AT&T-owned HBO, and other content producers as well.

Netflix nabs 17 nominations at upcoming Golden Globe Awards

One way to gauge the popularity and success of a movie or television show is by the number of major awards and nominations it receives. Netflix earned four nominations for best picture at the Golden Globes, a significant milestone.

This is the first time that Netflix has earned a nomination for best picture at the Golden Globes. Netflix is leading the way with 17 Golden Globe nominations in total, with HBO coming in a close second with 15. Disney remains the dominant force in animated movies with three nominations for best motion picture in the animated category.

Having critically acclaimed movies on its streaming service is a great way for Netflix to be able to promote its content, and it effectively becomes free advertising as well, especially if the movies win any awards.

Netflix has had some notable hits

One of the nominated movies, The Irishman, which is up for five awards, has seen a significant number of views in just the first week that it has been available. According to Netflix, 26 million accounts watched the vast majority (70%) of the popular film. The number of people who watched the movie is likely even higher, as many subscribers will watch together and some share accounts. However, that's still a significant amount and more than 16% of the 158 million paid memberships that the streaming service had as of the end of Q3, numbers which it released back in October.

However, that's still less impressive than the debut that Netflix's Bird Box had back in 2018, with more than 45 million accounts watching the movie during the first week that it was available, good enough for nearly one-third of Netflix accountholders at the time.

Even though the movie didn't earn a nomination from the Golden Globes, Bird Box has still been tremendously popular. It has been the most-watched Netflix movie in the 12-month period ending September 2019, with 80 million accounts viewing the movie during that period. Murder Mystery followed with 73 million, while television show Stranger Things had 64 million views.

Why should investors care?

The important takeaway from all this data? It proves that even though Netflix will be losing licensed content, it will still have many of its own original shows and movies that consumers will want to watch. The company has proven that it can provide top-quality content that can compete with Disney and HBO.

It's a testament to Netflix's success that even though it has increased its price multiple times, it has continued to grow subscribers. In May 2019, the company increased its popular standard plan, which offers two high-definition streams, to $12.99. Less than two years ago, new subscribers were paying just $9.99, or about 25% less than they are now.

By comparison, HBO NOW costs $14.99 per month and currently has about 9 million subscribers. AT&T's new service, HBO Max, will feature more content and will be available in May. AT&T expects that 75 million to 90 million subscribers worldwide will sign up for the service by 2025. Disney is also projecting similar numbers as well. Both HBO and Disney have a long way to go to catch up to Netflix, and there's no guarantee that they ever will given Netflix's diverse and popular catalogue of content.

Premium content is able to command top dollar and helps companies like Disney, AT&T, and Netflix earn more revenue. And that's why Netflix producing quality content is going to be critical for the company to not only grow and keep subscribers, but to keep its bottom line strong as well.

Losing subscribers is inevitable, but that doesn't mean Netflix is doomed

There's no denying that losing licensed content like Friends next year and The Office in 2021 will hurt Netflix's subscriber numbers. The company is going to have to lean heavily on its own content, but the good news is that it's proven to be more than capable of competing with the top players in the industry.

Next year is going to be a big test for Netflix, but subscribers have indicated that they're not eager to ditch the service just yet, even amid news that some key licensed content will be leaving.

Is the stock a buy?

Netflix is currently trading at nearly 100 times its earnings, a steep premium to pay for a tech stock that's going to face some tough challenges in the years ahead in which growth may not come as easily. Over the long term, the business is likely to remain strong, but the stock is just not a good buy at its current price.

This article originally appeared in the Motley Fool.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short January 2020 $130 calls on Walt Disney. The Motley Fool has a disclosure policy.