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In order to “put the right title in front of the right person at the right time” when viewers spend, on

average, 1.8 seconds in deciding whether to reject a recommendation, Netflix gives special attention to

thumbnails—the small images that accompany a title. Rather than use the artwork or still photos created

by the producers, Netflix creates its own that are designed to optimize users’ selections and are customized

to viewers’ characteristics.

User‐generated data is also applied to the selection and design of original content. In its first original

production, House of Cards, Netflix combined data that revealed (a) the popularity of the British version of

the show, (b) British House of Cards viewers also watched movies that featured Kevin Spacey or were

directed by David Fincher, and (c) those watching David Fincher movies tended to view in a single sitting.

On this basis, Netflix commissioned a US version of House of Cards starring Kevin Spacey and directed by

David Fincher. As Netflix has accumulated data on viewer characteristic, preferences, and viewing behavior,

so it has refined its application of data analytics to content design. As a result, success rates for Netflix

shows are about double those of TV shows generally.

Netflix relies heavily on experimentation to generate data and product innovation: “We ask our members,

through online experiments, which of several possible experiences resonate with them. This culture of

experimentation and a commitment to data‐driven decision‐making extend through all levels of the

company … Our executives make time to understand experimental methods and test results, and their

close interaction with data scientists helps ensure that our data‐driven decisions are sound from both

statistical and business perspectives.”4

Management Style

Netflix’s management style is unconventional. Co‐CEO, Reed Hastings, sums it up in the title to his book No

Rules Rules. As the Financial Times explains:

Staff face no limit on holiday, nor do they need expenses approved. Everyone is deliberately paid more

than their market rate—much more. “Brilliant jerks” are sacked. Big risk‐taking is encouraged. Openness

and transparency—“sunshining”—applies to almost everything, at least internally. Market‐sensitive

earnings data is shared with 700 staff (most companies treat them like nuclear codes). Individual salaries

are searchable too … At Netflix “F&R”—freedom and responsibility—is the creed.

But there is a hard edge. This company’s mantra is being “a team, not a family”. So good employees are

subject to the so‐called “keeper test” where adequate performance is rewarded with “a generous

severance package.” Radical candor extends to near‐constant discussion of whether employees are a

Netflix fit. It smacks of nonstop group therapy, with the risk of eviction at any moment, pour décourager les

autres. “If your people choose to abuse the freedom you give them, you need to fire them and fire them

loudly,” Hastings writes.5

For all the emphasis on data and algorithms, decisions at Netflix are by individuals and teams. These are

guided by a culture that is articulated in the company’s “Reference Guide on Our Freedom & Responsibility

Culture” comprising 128 PowerPoint slides published in 2009.6 Facebook COO, Sheryl Sandberg, suggests

that the presentation “may well be the most important document ever to come out of the Valley.” Among

its values, principles, and desired behaviors, Netflix states:

What is special about Netflix, though, is how much we:

1. encourage independent decision‐making by employees

2. share information openly, broadly, and deliberately

3. are extraordinarily candid with each other

4. keep only our highly effective people

5. avoid rules.

6. Our core philosophy is people over process. More specifically, we have great people working

together as a dream team. With this approach, we are a more flexible, fun, stimulating, creative,

collaborative, and successful organization.7

This culture can also be viewed as: “ruthless, demoralizing and transparent to the point of dysfunction.”8

Netflix has “built a unique version of corporate hell … founded on brutal honesty, ritual humiliation, insider

lingo, and constant fear.”9

Walt Disney Company

Disney’s Development and Strategy

Walt Disney Company is the world’s biggest entertainment company. It was founded to produce animated

movies by brothers Walt and Roy Disney, in 1923. Since then, it has diversified into live action movies, film

distribution, theme parks, TV productions, cable TV (the Disney Channel, ESPN), broadcast TV (ABC), local

TV stations, video games, hotels and resorts, real estate development, retail Disney stores, and consumer

products (mainly through licensing). Much of Disney’s growth has been through acquisition, including ABC

(1995), Pixar Animation Studios (2006), Marvel Entertainment (2009), Lucasfilm (2012), A&E Television

Network (2013), and 21st Century Fox (2019). Disney has also expanded internationally—notably with

theme parks in Paris, Tokyo, Hong Kong, and Shanghai. Table 7 shows financial data for Disney as a whole.

Tables 8 and 9 disaggregate financial performance by business segment and by geography.

Despite its diversification, Disney considers itself an integrated company. At the heart of this integration is

its mission “to entertain, inform and inspire people around the globe through the power of unparalleled

storytelling” and a commitment to family entertainment that embodies its values of “innovation, quality,

community, storytelling, optimism and decency.”

At the apex of Disney’s integrated business system is its movie making: its animation and movie studios

develop content that is distributed through movie theaters, cable, broadcast TV, DVDs, and the internet.

The movies create the themes and the characters that generate spin‐off TV shows, live shows on stage and

on ice, theme park rides, books, music, and consumer products licensing. Under Bob Iger (CEO, 2005–

2020), Disney pursued the “content is king” mantra in creating a vast portfolio of billion‐dollar franchises—

hence the acquisitions of Marvel and Star Wars.

Iger was also committed to technological innovation—hence the acquisition of Pixar to upgrade Disney’s

animation capabilities and the decision to become a major player in video streaming.

Disney and Video Streaming

In 2009, Disney acquired an equity stake in Hulu, a subscription video‐on‐demand service that was

launched in 2008. Following the 2019 acquisition of 21st Century Fox, Disney’s ownership increased to 67%

and Hulu was merged into Disney’s newly created Direct to Consumer & International business segment.

In April 2019, Disney launched ESPN Plus, a streamed version of its ESPN sports cable channel. ESPN used

the streaming technology platform of BAMTech, which had been acquired by Disney in 2017. However, this

was only the spearhead of a much bigger push. On a February 2019 conference call announcing Disney’s

quarterly earnings, Iger announced that “DTC [direct‐to‐consumer] remains our No. 1 priority,” and that its

new Disney Plus streaming service would draw upon Disney's iconic brands and franchises to “break

through the competitive clutter and connect with consumers.”10

Following months of pre‐launch promotion focused upon Disney Plus’s new offerings—notably a Star Wars

spin‐off The Mandalorian—the service launched on November 12, 2019, with a monthly subscription of

$6.99. Despite a host of technical glitches that confirmed widespread doubts whether Disney possessed the

necessary technical experience to manage a major, international video streaming service, Disney was able

to announce over 10 million first‐day subscribers. By the end of 2019, Disney Plus was available in the

United States, Canada, the Netherlands, Australia, and New Zealand and by end‐September 2020 in most of

Western Europe, India, Japan, Indonesia, and the Caribbean.

Responding to criticisms that Disney Plus lacked new content, Disney expanded production during 2020. At

the beginning of 2021, Disney was working on about 35 television series. These included 10 based upon its

Marvel franchise, 10 based upon its Star Wars franchise, and several Pixar animations. In addition, it was

developing 15 movies to be released on Disney Plus in the next few years.11

To expand market penetration, Disney has formed partnerships with media and communications

companies—notable with Verizon in the United States, Canal Plus in France, and Comcast's Sky in the

United Kingdom and Ireland. These arrangements typically offer wireless and home internet subscribers a

free year of Disney Plus. In the Canal Plus and Sky deals, subscribers access Disney Plus through their set‐

top boxes. These deals are modeled on 2017 Netflix’s partnership with T‐Mobile.

While Disney Plus has been the primary focus for Disney’s push into streaming and has attracted the most

attention because of Disney’s renowned characters and franchises, Hulu has come into focus as the “sexier,

R‐rated sibling of Disney Plus.”12 In addition to a large library of TV shows and movies and the ability to

watch live TV channels, Hulu has been successful with much of its original programming—notably

Handmaids’ Tale, Mrs. America, Harlots, Devs, Normal People, and Catch‐22. In contrast to Netflix, Hulu has

concentrated on relatively few new shows but has emphasized big names and provocative subject matter.

Since Hulu carries advertising, Disney has access to an additional revenue stream. Advertisers are attracted

to streamed entertainment since it allows audience targeting, real‐time performance evaluation, and user–

advertiser interaction.

Table 10 shows the growth in Disney’s subscriber base since the launch of ESPN Plus.

The Outlook for 2021 and Beyond

In the early months of 2021, hopes of life returning to normality had been dashed by the slow roll out of

COVID‐19 vaccines and the persistent high rates of infection in much of the world. As a result, streamed

video entertainment continued to be a growth industry. Despite new entrants into the market during 2020,

all the major players were enjoying growth in subscribers and revenue.

According to Dritan Nesho, chief executive of market research company, HarrisX: “Instead of a streaming

war, there’s been streaming coexistence and parallel growth.”13 Rather than take subscribers from

established market leaders Netflix and Amazon Prime Video, the newcomers—Disney Plus, HBO Max, and

Peacock—have expanded the overall streaming market. The primary losers were the TV broadcasters and

cable TV channels. Between mid‐2018 and the end of 2020, US satellite and cable companies had shed pay‐

TV customers at the rate of more than 1 mil