Baby Yoda's Finally Coming to Europe—And So Is Picard

Netflix Inc., Amazon.com Inc. and Walt Disney Co. are preparing for a space war in Europe, splurging on blockbuster science fiction shows in a battle for subscribers that’s adding to the pressure on traditional broadcasters.

Amazon’s Prime Video starts streaming “Star Trek: Picard” in Europe on Friday, bringing the famous captain of the Starship Enterprise out of an 18-year retirement. Netflix will fire back with a third season of “Star Trek: Discovery” later this year. Amazon and Netflix acquired the two series from ViacomCBS Inc. to bolster their defenses against Disney, whose streaming platform Disney+ makes its debut in the biggest European markets on March 24. Its headline show is “The Mandalorian,” a Star Wars spinoff that’s built a cult following in the U.S. thanks to rave reviews and a widely memed character nicknamed “Baby Yoda.”

Big-budget franchises with mass appeal and a dedicated fan base are vital for drawing in new audiences. They also play to the growing scale advantage that the streamers have over European broadcasters, most of which would struggle to produce anything similar in the face of rising production costs and falling ad revenue.

“We’re in a content bubble that’s still getting bigger as streaming companies invest in big-ticket shows,” said Matthew Bloxham, an analyst at Bloomberg Intelligence. “It’s virtually impossible for traditional broadcasters to produce this kind of content.”

The interstellar bonanza raises the stakes for the U.S. entertainment giants by testing popular demand for three expensive space shows in a single year.

The European launch of Disney+ follows a strong start in the U.S., where 10 million customers signed up on the service’s first day alone. It’s an ominous sign for Netflix, which has come to rely heavily on Europe for subscriber growth. The streaming giant’s expansion in the region may start to slow if it can’t come up with answers to powerful Disney franchises such as Star Wars, Marvel and the Mouse House’s iconic animated movies.

Netflix arguably has most at stake as a pure-play video-on-demand business: Amazon is also the world’s biggest online retailer and Disney owns everything from movie studios to theme parks.

“Netflix has no way of monetizing their investment in content other than its customers continually subscribing,” said Tim Westcott, an analyst at IHS Markit in London.

Both Disney+ and Apple Inc.’s TV+ service—another recent entrant—are undercutting Netflix on price in Europe, costing 6.99 euros and 4.99 euros a month, respectively. A Netflix subscription starts at 7.99 euros, but that’s only for inferior-quality SD streaming. The HD plans begin at 11.99 euros a month.

Budgets for science fiction shows are typically far higher than equivalent dramas set back on Earth—think special effects, large sets, and top stars like Picard’s Patrick Stewart.

Disney spent $100 million to make the first season of “The Mandalorian,” more than the cost of most feature films. Amazon and Netflix bought the rights to “Picard” and “Discovery” from the CBS network for an undisclosed amount, but chances are they didn’t underpay: Former CBS Chief Executive Officer Les Moonves said in 2016 that Netflix’s “Discovery” deal meant the show was fully paid before it even aired on CBS’s own streaming service.

European media players are particularly vulnerable to competition from the streaming giants, given the more fragmented nature of the local market. With the exception of a few multinational pay-TV companies, such as Comcast Corp.’s Sky and Mediaset SpA, most European countries have their own small broadcasters, all struggling to mount competitive defenses against American streaming services. In contrast, media companies in the U.S. have turned to mergers to bulk up and put real money behind their own video-on-demand products.

A boom in production to feed the new platforms is inflating costs, further squeezing out national broadcasters that were once the top customers for U.S. blockbuster shows. Disney’s entry into Europe means future shows from its brands probably won’t be available to others.

Sky is still a credible stable for big-budget U.S. drama. Time Warner Inc.’s HBO in October renewed a deal for Sky to carry shows such as “Game of Thrones” and “Watchmen” in Europe and pursue co-productions, meaning the U.S. company is unlikely to introduce its Max streaming service to the region anytime soon, said Westcott.

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