March 26, 2019
The day after Apple’s media coup announcing plans for an enhanced Apple TV app and related services, Wall Street appears divided depending upon which side of the Netflix stock it sits.
With more than 1.4 billion iOS connections globally, the revamped Apple TV+ service would appear to be a major competitive threat to Netflix’s global base of nearly 150 million subscribers and future growth.
With a history of industry disruption and creating consumer markets through iTunes, the iPhone, iPad and Apple Watch, conventional wisdom suggests Cupertino, Calif.-based Apple could upend Netflix’s burgeoning growth and market dominance — despite its relatively late entry into the over-the-top video ecosystem.
Needham analyst Laura Martin contends Apple TV+ could be “poison” to Netflix by virtue of Apple’s 900 million existing connected consumers and its ability going forward to bundle original content, discounted third-party OTT services, music and video games.
In a note, Martin writes that if Apple is successful converting just 10% of its unique users to Apple TV+, it would be able to fund content with a budget nearly triple Netflix’s. The analyst is also bullish on Disney’s pending Disney+ streaming service, telling media it could generate 50 million subs.
Dan Ives, media analyst with Wedbush Securities, says Apple is separating itself from Netflix by catering to family-friendly content on a secure platform.
“[Apple] is trying to differentiate itself [from] competitors and flex its Apple brand muscles to get more consumers on this ‘trustworthy’ platform,” Ives wrote. “We continue to believe the company has the opportunity of capturing 100 million consumers on this streaming service over the next three-to-five years.”
On the flipside, Raymond James analyst Justin Patterson says Netflix market position is well-built to withstand the threat.
“Similar offerings already exist, suggesting this service is more incremental than revolutionary,” Patterson wrote in a note. “We believe Apple’s and Disney’s launches will not adversely affect Netflix’s competitive position.”
Longtime Netflix bear Michael Pachter, with Wedbush Securities, says that with Apple reportedly spending $2 billion on original content, including licensing content from Netflix’ studio contributors – in addition to offering third-party OTT services — the SVOD pioneer will have increased challenges finding compelling content to justify its standalone service.
“We expect Netflix to suffer the double whammy of seeing existing content migrate to competitive services at the same time that new domestic subscribers are more difficult to attract,” Pachter wrote in a March 26 note.