By 2024, Netflix Inc. and The Walt Disney Co. are expected to be neck and neck for leading the global streaming market. But who will claim the No. 3 spot?
During a Feb. 11 earnings call, Disney executives reported that Disney+, Hulu LLC and ESPN+ had a collective 146.4 million subscribers around the globe at the close of Disney's first fiscal 2021 quarter, ended Jan. 2. That is up from the 137 million direct-to-consumer subscribers the company reported at its Dec. 10, 2020, investor day, when Disney boosted guidance for the platforms to between 300 million and 350 million combined worldwide customers by the end of its fiscal 2024.
At that point, analysts widely believe Disney's DTC sub base could exceed Netflix, which added 8.5 million net additions in the fourth quarter to finish 2020 with 203.7 million global members. But while Disney and Netflix will be jostling for No. 1, the field is a bit more open when it comes to the future No. 3 seat.
|Netflix and Disney prepare to duke it out for the No. 1 spot in the global streaming market|
|Source: Pexels||Source: Disney|
Moody's analyst Neil Begley noted Amazon.com Inc.'s Prime Video is the other top-rung streaming player, but it is positioned quite differently from either Netflix or Disney. Prime Video is included as part of Amazon's larger Prime subscription package, which includes free shipping and other perks.
With Andy Jassy, CEO of Amazon Web Services Inc., poised to succeed Amazon founder Jeff Bezos as CEO in the third quarter, Wall Street is wondering about the company's continued commitment to original series and film production, and if it might pursue more live sports rights, including a larger NFL package.
The analysts, meanwhile, are convinced that the streaming services from the other media conglomerates will fashion a solid second tier over the next few years.
Macquarie Capital analyst Tim Nollen is impressed by the growth of NBCUniversal Media LLC's streaming service Peacock, which counted 33 million sign-ups as of late January. The service launched to parent Comcast Corp. homes on April 15, 2020, before going national three months later. "The Office," after a long run on Netflix, became available on Peacock in January and is resonating with users, and the service has also gained distribution following its deal with Roku Inc.. However, it has yet to ink a pact with Amazon’s Fire TV.
A truer gauge of Peacock's performance, said Nollen, will come after its launch sponsorship deals run off, and the company is able to better monetize the service through its addressable targeting capabilities.
Seth Shafer, an analyst at Kagan, a research unit within S&P Global Market Intelligence, noted that unlike Netflix or Disney+, Peacock offers live sports, which can be a differentiator. Peacock's rights roster includes Premier League soccer matches and the Tokyo Olympics coverage this summer.
Highlighted by three minutes of promotional time in CBS (US)'s coverage of Super Bowl LV, ViacomCBS Inc. is in the midst of a marketing campaign touting the upcoming conversion of subscription service CBS All Access to Paramount+ on March 4 in the U.S. The service — featuring CBS network fare, originals, cable network content and theatricals from Paramount Pictures and sports — will also bow in Canada and Latin America that day, in the Nordics on March 25, and in Australia come midyear.
Begley said the NFL and the NCAA "March Madness" basketball tournament are key assets in the U.S. for Paramount+, but they do not hold much appeal outside of the U.S. As such, ViacomCBS might need to invest in other sports as part of local content offerings abroad.
In the meantime, both Shafer and Begley are curious about the overall content spend behind the service, as ViacomCBS has continued to furnish products for other video providers.
"ViacomCBS is a wild card," said Begley, noting it will be interesting to track Paramount+'s international budget for local products and how much overall spending is deployed for originals.
More details should be forthcoming at the company's Feb. 24 investor day.
After bowing in the U.K. and India last year, Discovery Inc. rolled out its aggregate streaming service in the U.S. on Jan. 4. Stateside, Discovery+ featuring some 55,000 episodes across its portfolio, as well as 1,000 hours of original content during its first year for $4.99 per month with light advertising, and for $6.99 sans commercials. The initial launch phase will extend to some 25 countries and include local content.
Discovery puts the total addressable market for its aggregate service at 70 million households in the U.S. and 400 million globally, a figure that is notably higher than Disney's 2024 projection for its streaming services. Shafer said the Discovery service has a long runway outside the U.S.
Nollen projects the service will garner 10 million subscribers in its first year.
However, he envisions Discovery+'s gains coming at a price: a reduced position for Discovery within the video bundle as the offering's expanse could trigger more cord-cutting.
Discovery reports fourth-quarter earnings Feb. 22, when it should supply service updates.
Launched last May, Warner Media LLC's streaming service — centering on content from premium service HBO, fare from Turner’s cable portfolio and Warner Bros.' TV and film libraries, and originals — doubled its activation level in the fourth quarter of 2020 to 17.2 million.
HBO Max and HBO finished the year with a combined 41.5 million subscribers, a nearly 20% jump from 34.6 million at the close of 2019.
Still, the analysts are less bullish about HBO Max than some of the other services. Begley said HBO Max has "impediments to overcome" — namely its name "doesn't sound new," and the same high price point as HBO at $14.99 per month. Disney+ costs $6.99 a month, while Netflix starts at $8.99 a month.
"If I never had HBO, am I going to try it now?" Begley said.
With COVID-19 forcing Americans to stay home, Begley said HBO-parent AT&T Inc. missed an opportunity to lower the price to get more people to sample the service. Begley added it is easier to raise the pricing when subscribers are already in the tent.
AT&T, which invested $800 million in HBO Max in the fourth quarter as part of a $2 billion outlay in 2020, will host an investor day later this quarter to further discuss its plans.
Shafer wonders how much more AT&T will allocate on content after the initial outlays.
Begley said the current strategy to simultaneously bow its entire 2021 theatrical slate for one month on HBO Max will bring new subscribers to the streaming fold. However, there could be defectors, when Warner Media stops premiering the theatricals on the streaming service.
Internationally, HBO Max will make its first international foray in late June across Latin America and the Caribbean.
A lower-priced, ad-supported version of the service is slated to bow in the second quarter.