October 23, 2019
As widely reported, Apple and Disney are launching separate high-profile branded SVOD services next month, with NBC Universal slated to do the same next year.
The moves prompted AT&T to announce a public unveiling on Oct. 29 of WarnerMedia’s subscription streaming video platform HBO Max — months before its early 2020 launch.
Each new service has a lot riding as parent media/tech companies forge full-steam ahead into crowding over-the-top video waters heretofore controlled by Netflix, Amazon Prime Video and Disney-owned Hulu domestically.
On the retail end, consumers now face myriad inexpensive SVOD services delivering original and non-exclusive content. When combined, the choices can be overwhelming and expensive.
“Options are great for consumers when it comes to deciding what to watch,” said Peter Katsingris, SVP of audience insight at Nielsen. “But they’re also decidedly complicated for an industry that continues to fragment and search for unique ways to influence their behavior and perhaps steer eyeballs toward their network, program, service or brand.”
Indeed, Disney CEO Bob Iger calls the pending $6.99 Disney+ service “the most important product the company has launched” in his 14 years as chief executive.
Disney expects to attract 60 million-to-90 million subscribers for Disney+ through 2024, which would be more than half of Netflix’s current 158 million global subs. It is giving away the service to Verizon’s unlimited data subs as part of a promotion.
Apple is targeting more than 900 million iPhone users worldwide through various incentives for the $4.99 Apple TV+.
Short-form video competitor Quibi ($4.99) from DreamWorks Animation founder Jeffrey Katzenberg and former Hewlett-Packard CEO Meg Whitman, inked a partnership with T-Mobile, securing access to the telecom’s 83 million subscribers.
The crush of pending streaming video services prompted Netflix CEO Reed Hastings last month to tell a British audience to expect “a whole new world starting in November” following the SVOD invasion, which includes Hulu’s U.K. market expansion.
“Scale will be key in the [direct-to-consumer] space, but clearly the coming year is just the first phase in this era,” David Sidebottom, analyst with Futuresource Consulting, told the IBC365 platform. “D2C services will likely evolve, with their parent companies continuing to evaluate the benefits of D2C vs. third party [content license] agreements.”
“This will be particularly the case as services expand on an international basis, where legacy agreements, existing scale distribution partners and differing levels of SVOD uptake will be factors in their evolving D2C strategy,” he said.
Michael Pachter, media analyst at Wed bush Securities in Los Angeles, believes that with the surge of original content and catalog exclusives such as “Friends” and “The Office” migrating online, consumers have more reasons to choose OTT.
“If all that was happening was incremental services being offered, consumers might feel bamboozled,” Pachter said. “Instead, so much content is shifting to OTT services that many consumers will opt to subscribe to more than one service.”
Pachter says exorbitant pay-TV contracts paved the way for OTT video, with online TV offering a less expensive premium channel option.
“I expect cord cutters to look at rabbit ears and multiple SVOD services as a substitute. That’s why DirecTV lost 2 million subs since AT&T bought them,” he said.
More importantly, Pachter says that with Netflix losing Disney/Fox, NBC Universal and Warner Bros. content, consumers will feel compelled to try new services offering recognizable programming and/or favorite shows.
Indeed, the analyst believes Netflix will lose around two-thirds of its content (measured in viewing hours) and will have a tough time replacing that with content of similarly perceived quality.
Disney+ has an enormous library of content not available anywhere (Snow White, Fantasia, etc.) that will find its way to their service; the studio is also going to put its recent movies there and take those away from Netflix.
“That tells me that Disney+ gets to 30 million subscribers relatively quickly,” Pachter said.
He believes that Apple TV+, with just 12 original shows, will struggle with non-iPhone users unwilling to pay for limited content.
“Until Apple TV+ gets critical mass, there is no way they will be competitive,” Pachter said.
The analyst is “pretty confident” the HBO Max model will work, if it transfers existing HBO Now subscribers for a free probationary period lured by original content.
“If it’s $3 to $4 per month, they’ll get 10 million subs immediately and probably get to 80% conversion [from HBO Now] in a few years,” Pachter said.