Anticipated Cord Cutting to Aid Streaming Providers in 2021

Streaming services have been giving movie studios a run for their money with more people shifting to over-the-top (OTT) platforms for media content. The pandemic has given further boost to the streaming industry with an increase in not only subscribers but also in revenues.

With theaters operating in limited capacity, filming of big-ticket projects getting deferred indefinitely and films premiering on OTT platforms skipping theatrical release, more viewers are expected to shift to OTT platforms offering original and diverse content. Markedly, streaming consumption now accounts for 68% of TV viewing compared with 28% for traditional TV viewing.

According to Future of TV survey of more than 2,100 consumers in the United States by The Trade Desk, 27% of cable TV subscribers are planning to cut their subscriptions by the end of 2021.

Last year, 31.2 million households in the United States are expected to have cut the cable TV cord in aggregate, per a report in eMarketer. The number will likely grow even further by 2024, reaching 46.6 million total cord-cutter households, or more than a third of all U.S. households that no longer have pay TV.

The expected spike in cord cutting should encourage new entrants like AT & T’s (T) HBO Max, Disney’s (DIS) Disney+, Comcast (CMCSA) division NBCUniversal’s Peacock and Apple’s (AAPL) Apple TV+ in the increasingly crowded streaming space dominated by Netflix (NFLX) and Amazon’s (AMZN) prime video services among others.

Markedly, revenues in the global SVoD industry is projected to reach $71.2 billion in 2021 and witness a CAGR of 11% from 2021 to 2025, per a Statista report.

Netflix's Solid International Content Aids User Growth

Netflix has been spending aggressively on building its original show portfolio. The streaming giant had 195.15 million paid subscribers globally at the end of the third quarter, up 23.3% from the year-ago quarter.

Apart from shows such as Bridgerton, which is expected to be viewed by 63 million households within 28 days of its Dec 25 debut, We Can Be Heroes has also garnered significant viewership. The movie is expected to reach 44 million households within four weeks of its availability. Markedly, Mexican show Oscuro Deseo (Dark Desire) season 1 was its biggest local-language original globally while Indian Matchmaking also witnessed healthy viewership.

This Zacks Rank #3 (Hold) company announced that December 2020 was the best month in its history in terms of total hours viewed and average hours viewed per subscriber. Moreover, the week of Dec 25-31 was a record for the company in terms of total hours viewed and average hours viewed per subscriber.

The company now expects paid net additions to be 6 million compared with the year-ago quarter’s 8.8 million. Notably, since COVID-19-related shutdowns were lifted, the company has completed more than 50 productions and plans to complete another 150 by the end of the year.

Disney’s Content Portfolio a Potent Threat for Netflix

Disney plans to shell out $14-$16 billion in global direct-to-consumer content expenses across Disney Plus, Hulu and ESPN Plus in fiscal 2024 as it ramps up original series and films to compete with Netflix.

The company revealed that several new films will debut exclusively on Disney+, including live-action versions of Pinocchio, Peter Pan and Wendy and Disenchanted, a sequel to the film Enchanted while it allocated $8-$9 billion of its content budget to Disney+ alone.

Significant momentum in its online streaming service aids the company to offset declines in revenues due to the closure of theme parks amid the coronavirus outbreak. Last month, Disney revealed that its portfolio of video streaming services hosted more than 137 million paid subscribers globally. Notably, as of Dec 2, Disney+ had 86.8 million subscribers, reflecting strong growth since its launch in November 2019. Also, ESPN+ had 11.5 million subscribers while Hulu had 38.8 million.

Further, the company expects its streaming services to reach 300-350 million total subscriptions by fiscal 2024. The positive outlook is mainly driven by the increase in new content across its portfolio, with Disney+ set to release more than 100 titles per year that include 10 Marvel series, 10 Star Wars series, 15 Disney live-action, Disney Animation, and Pixar series and 15 Disney live action, Disney Animation, and Pixar films.

Also, it plans to update Disney+ to include Star, Disney’s new general entertainment content brand, from Feb 23, 2021, in selected markets outside the United States. The company will launch Star+, a separate streaming service in Latin America in June 2021.

Other Entrants Intensify Streaming Competition

Meanwhile, Apple TV+ is looking to premiere Shantaram, a series that is based on the New York Times bestseller novel from Min Jin Lee, and Uma Thurman-starrer Suspicion based on the award-winning Israeli series, False Flag.

The iPhone-maker has a handful of blockbusters lined-up such as Emancipation, the in-development Will Smith film it acquired for around $105 million. Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Additionally, AT&T’s HBO Max streaming service launched in May helped grow the overall pool of HBO and HBO Max customers by 38 million in the United States, and 57 million globally as of the third quarter of 2020.

This Zacks Rank #4 (Sell) company reported that Warner Bros.’ entire 2021 slate of 17 films that includes The Matrix 4, Dune remake, the Sopranos prequel The Many Saints of Newark and The Suicide Squad will debut both on HBO Max and in theaters on their respective release dates.

Moreover, Peacock’s low-cost and ad-based subscription service is a game-changer. The free tier offering will help Comcast, another Zacks Rank #3 company, attract advertisers, once the impact of coronavirus dies down.

Markedly, over 26 million people have signed up for Peacock with a projection of up to 35 million subscribers by the end of 2024.

Peacock’s full content line-up includes a mix of shows from the NBCUniversal empire, new original content and select movies, ranging from the Despicable Me franchises to Knocked Up.

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