Should Disney+'s Small Catalog Worry Us?

Disney's (NYSE:DIS) hotly anticipated "Netflix (NASDAQ:NFLX) killer" is finally near its launch date. Disney is bringing some beloved brands, including Marvel Studios and Star Wars, to the new streaming platform Disney+, and the looming competition has some investors skittish about Netflix and bullish on Disney.

But it's not all good news for Mickey and company. Disney+'s catalog will have some major media properties, but it will also reportedly be less than 20% of the size of Netflix's library. In the era of binge-watching and insatiable appetites for entertainment, can Disney fare well with a slimmer service?

In one word: yes. Here's why.

Quality over quantity

Streaming services need content hours to fill users' time, but they also need to entertain people. The rule is as obvious as it is hard to measure: Quantity must be balanced with quality.

Extreme cases can demonstrate this very quickly. Take Tubi TV, a free streaming service that features more titles than Netflix. Needless to say, Netflix hasn't suffered much from the competition. Tubi TV's massive catalog is notably light on familiar, popular, and critically acclaimed titles, and Netflix has been able to continue growing its subscriber base of paying customers despite the competition from a "bigger" free service.

AT&T's (NYSE:T) HBO, though not a perfect analogue to Disney+ (HBO is, after all, a premium cable channel as well as a streaming service), also offers a lesson in quality and quantity. HBO's content hours lag far behind those of most streaming services, but valuable hits like Game of Thrones have kept it at the forefront of the streaming conversation.

Netflix has had its own issues with quality. An aggressive original-content strategy has led Netflix to churn out lots of content hours, and while a few shows have been undeniable critical and popular hits, plenty of others have been significantly less well received. Netflix has shown an ability to get users to watch shows and films that are less than critically beloved, but a big first weekend for a forgettable movie like Bird Box does a better job of chewing up content hours than it does convincing customers to choose Netflix over competitors that offer consistently quality content like Game of Thrones.

And Disney is coming in with some real quality content. Disney's Marvel Studios has changed the world of filmmaking with its sprawling franchise of interconnected films, the vast majority of which were solid hits (and some of which were massive blockbusters). And Disney is investing big in shows based on existing IP, such as The Mandalorian (which is based in the Star Wars universe and is being made with the help of plenty of high-priced talent).

"Quality" is a hard thing to define, but past records indicate that content hours are far from being the end-all and be-all of streaming, and customers and investors have a lot of reasons to believe that Disney will release quality content.

The price is right

Disney's streaming service is smaller than Netflix's -- but it's also cheaper.

Disney has announced Disney+'s price at $6.99 per month. That's $2 less per month than the cheapest Netflix plan ($8.99 per month) and $6 less per month than Netflix's most popular plan, which is the $12.99-per-month standard plan. And Netflix's Premium Plan, which offers 4K streaming and may soon become the default choice of consumers, costs $15.99 -- more than twice what Disney+ costs!

Netflix has established that customers are willing to pay more than $10 a month or more for streaming; so has HBO, which costs about $15 per month in most forms (that is, as a stand-alone streaming service, as an add-on to many pay TV packages, etc.). But the streaming market is suddenly becoming much more fractured and much more competitive. But Disney isn't the only one launching a new streaming service soon -- Apple (NASDAQ:AAPL), Comcast(NASDAQ:CMCSA), and AT&T, among others, are making similar moves.

Nobody knows for sure if the share of customers with two or more streaming subscriptions will rise with the number of streaming subscriptions (in fact, it's hard to say how many of these consumers there are now -- among other issues, the numbers are thrown off by the fact that Amazon Prime is more than just a streaming subscription and that not all of its subscribers even use the included on-demand streaming service). One thing does seem sure, however: a potential increase in the number of multisubscription homes is the only way for many of these services to survive.

And at its lower price point, Disney+ is better positioned to be a part of a multiple-subscription streaming solution. In fact, Disney has two services that fit the (literal) bill, because Disney also recently dropped the price of Hulu's streaming video-on-demand service (Disney has a controlling interest in Hulu). Customers will be able to combine Disney+ or Hulu with another service more affordably than would be possible with Netflix, and customers could get Disney+ and Hulu for the same price they'd pay for Netflix's most popular plan on its own.

Size isn't everything

Disney+ may be a bit smaller than Netflix, but Disney's streaming strategy as a whole still looks good. With powerful brands and high-quality shows, lower prices, and a lot of potential for bundling, Disney's streaming offerings are really starting to come together. In a fractured streaming future, Disney's model could be the blueprint for success.

This article originally appeared in the Motley Fool.

Stephen Lovely owns shares of Apple, AT&T, and Netflix. The Motley Fool owns shares of and recommends Apple, Netflix, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.