Social distancing efforts have more people staying at home, and they're streaming a lot of video. In fact, consumer demand for streaming video may outpace what most consumers already have available in their lineup of subscription and ad-supported options. There's only so many times you can rewatch Stranger Things on Netflix (NASDAQ: NFLX).
Global demand for subscription streaming video services will get a 5% bump from the coronavirus pandemic, according to Strategy Analytics. That translates into an additional 47 million subscriptions by the end of the year. That's on top of the 96 million subscriber additions the research company was already modelling for 2020. Overall, the researchers expect total subscriptions to grow about 18%.
Investors need to consider who wins when demand for new streaming subscriptions climbs.
Something new to stream
Walt Disney (NYSE: DIS) just launched Disney+ in several countries in Western Europe. It's planning to launch in Belgium, the Nordics, and Portugal this summer. Disney's also planning to launch in India at some point this year as well, although it's had to delay its launch date.
The timing of Disney's European launch is great for content-hungry, self-quarantined consumers. Its strong brand will be sure to attract a lot of viewers across the continent. Disney could also see great success in India as well, by leveraging the massive audience on its Hotstar platform to drive awareness.
Unlike other big media companies entering the streaming video market this year, Disney is going global quickly. It owes that to being ahead of the curve in planning its streaming service and acquiring the streaming rights to nearly all of its back catalog. AT&T's (NYSE: T) WarnerMedia and Comcast's (NASDAQ: CMCSA) Peacock will only be available in the U.S. in the early going, although both have international expansion plans for some point in the future. If Disney can get ahead of them in 2020, it could be tough for either to catch up.
Netflix will be its biggest global competitor. While it's growing quickly in international markets, it's a lot easier for Disney to grow from zero subscribers than for Netflix to grow from 167 million. Disney showed its strength by grabbing 28 million subscribers in the first three months, primarily from the United States. If it can echo that success in Europe and India, it should grab a nice share of that additional 47 million subscriptions.
The back end of all that streaming
Whether consumers are streaming Disney+ or Netflix or a host of other streaming services, they're probably pinging Amazon.com's (NASDAQ: AMZN) servers. Both of the giant streamers use Amazon Web Services to deliver movies and TV episodes to viewers all over the world, as do dozens of other big video services.
Not only that, but Amazon also runs a couple of very popular platforms for subscribing to new video services: Fire TV and Prime Channels. The Fire TV platform has over 40 million users around the world, more than any other streaming platform. Every time a user subscribes to a new streaming service, Amazon gets a commission. Prime Channels is a wholesale distribution service for Amazon, where it sets the prices for consumers and pays content owners a fixed rate.
Amazon is a more agnostic way to play the growth in streaming subscriptions. Not to mention, it has its own video streaming service as well.
The potential for a recession
If the coronavirus pandemic is prolonged, it could cause an increase in subscriber churn, warns Michael Goodman, director for TV and media strategies at Strategy Analytics. "In the mid-to-long term much depends on the length of the pandemic and resulting economic damage," he said. "As businesses shut down and individuals are laid off consumers are going to have to make hard decisions about how they spend their money and as wonderful as Netflix, Amazon Prime Video, Disney+ and other [subscription video on demand] services may be, they are not essential services."
While Goodman's statement rings true, there are few forms of entertainment that provide the same level of value as a good streaming service. The average Netflix subscriber watches about two hours per day. That works out to less than $0.25 per hour of engagement for U.S. consumers (based on the standard plan).
But Netflix may stand out compared to other streaming video services, such as the relatively expensive HBO Max or more niche services that cost much more per hour of engagement. Even Disney+ could struggle as it faces challenges keeping subscribers engaged with the service without much original programming. It's likely most consumers would cut back on the number of streaming subscriptions, but still keep one or two. In that case, Netflix and Amazon should be resilient options for investing in streaming.
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