The Streaming Wars Enter Their Second Act

By: Spencer Israel

If the streaming wars have existed for several years, then it’s fair to say that the next two weeks will mark a turning point.

Call it “Streaming Wars Episode II: Attack Of The Giants.”

The streaming industry as we know it is changing. Think of the companies that dominate streaming. Names like Netflix and Roku have all succeeded because they got ahead of the movement. But a head start doesn’t last forever, and this week marks the beginning of the race for the rest of the field.

Friday, November 1 will see the launch of Apple’s Apple TV+. Disney’s Disney+ is going live November 12. AT&T’s HBO Max is set to launch in the spring of 2020. Peacock, the streaming child of NBC-owned Comcast, will launch in April. (These are just the newest big entrants, to say nothing of existing platforms like Amazon Prime Video, Viacom’s Pluto TV, Dish Network-owned Sling TV, and Hulu, of which Disney owns a majority stake).

Yes, the disruptors are being disrupted by the incumbents.

The increased competition is great for consumers, but it’s putting increased pressure on these companies to acquire users.

Take Netflix for example. In its most recent earnings report, the company reported 60.6 million U.S. subscribers and 97.7 international subscribers. That wasn’t good enough. While the company added 517,000 U.S. subscribers and 6.8 million international subscribers last quarter, both numbers were below Wall Street’s expectations.

Increased expectations are part of the reason why shares of Netflix are only up 5% year-to-date, lagging the broader market. But while the bears seem to have caught up to Netflix, that has not been the case with Roku.

The streaming platform provider, which also generates revenue from ads (unlike Netflix), reported over 30 million active users in its most recent earnings report, up 39% on a year-over-year basis and up 1.5 million from the previous quarter. And for whatever reason, investors have bought into the story, juicing the stock by about 380% in 2018, despite a recent pullback from all-time highs in September.

Predictably, the new players are already planning their user acquisition strategies.

In an effort to reach as many customers as possible from the jump, Disney+ will be available to Verizon customers with unlimited wireless plans for free for one year, HBO Max will be free for existing HBO subscribers and about 10 million AT&T customers, anyone who buys new Apple hardware will receive a free year of Apple TV+, and Peacock will be bundled to Comcast cable customers for free.

Of course, the question remains whether anybody can catch up to Netflix. The company’s 12-year head start on streaming gives it a tremendous edge, and has led some, like IAC’s Barry Diller, to say they’ve “already won the game.”

The consensus seems to be that there’s enough room in consumers’ wallets for a rotation of streaming services. The question now becomes, is there enough room on Wall Street for more than one streaming darling?

All performance data as of market close on October 29, 2019.

The author is long Amazon, Apple, Disney, Comcast, and AT&T in his 401(k).

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