Streaming Wars: Media, Tech Companies Slug It Out With Netflix

In the weeks leading up to the November 2019 launches of Apple TV+ and Disney+, Wall Street analysts and company officials went into high gear with subscriber predictions, content reveals and special media events.

Each new service has a lot riding on it, with their high-profile parent companies spending millions of dollars wading into over-the-top video waters long dominated, on the domestic front, by Netflix, Amazon Prime Video and Disney-owned Hulu.

“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.”

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 subscriber count. It is giving away the service to Verizon’s unlimited data customers as part of a promotion.

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“What Netflix is doing is making content to support a platform,” Disney CEO Bob Iger told Vanity Fair. “We’re making content to tell great stories. It’s very different.”

Apple is targeting more than 900 million iPhone users worldwide through various incentives for Apple TV+.

David Sidebottom, analyst with Futuresource Consulting, said that as new OTT services expand on an international basis, colliding with legacy pay-TV agreements, mollifying distribution partners with differing levels of SVOD uptake will be factors in their evolving D2C strategy.

“Scale will be key in the [direct-to-consumer] space, but clearly the coming year is just the first phase in this era,” Sidebottom told the IBC365 platform. “D2C services will likely evolve, with their parent companies continuing to evaluate the benefits of D2C vs. third party [license] agreements.”

SVOD Minefield

As the subscription streaming wars heat up, most people (70%) believe there will be too many choices, and 87% worry it will become too expensive to keep up, according to a new study. TV Time, an online tracking platform for TV and movie viewership, along with UTA IQ, UTA’s data and analytics group, found that 42% of survey respondents plan to add another SVOD service, with 20% adding two. Conducted in September, the survey fielded 4,816 respondents in the

United States and 1,818 combined in the Netherlands, Canada and Australia. Disney+ and Apple TV+ had the highest levels of awareness (88% and 63%, respectively) among the upcoming services, followed by HBO Max (37%) and NBCUniversal’s Peacock (28%).

“While Disney+ appears well-positioned to succeed internationally, it may require additional focus in strategic markets to encourage people to subscribe,” Alex von Krogh, VP of TV Time, said in a statement. “It will be important to track how people engage with their programming from a global perspective and how that compares to competitors in those markets.”

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, said he believes that with the surge of original content and catalog exclusives such as “Friends,” “South Park,” “Seinfeld” and “The Office” migrating online, consumers have more reasons to choose OTT. “If all that was happening were 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 long-term, 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 said that with Netflix losing Disney/Fox, NBCUniversal and Warner Bros. content, consumers will feel compelled to try new services offering recognizable programming and/or favorite shows. The analyst said he 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 (including its vaunted library of animated classics, such as Snow White, Fantasia, Sleeping Beauty and, more recently, Aladdin, The Lion King, Cars and Finding Nemo) that will find its way to the 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.

Parrot Analytics tracked pre-release demand for Apple TV+’s original series, including “See,” “For All Mankind,” “Dickinson” and “The Morning Show.” Parrot found the shows were well ahead of the audience demand average across all TV shows in the United States over the same time period. “See,” a futuristic sci-fi drama starring Jason Momoa, and “For All Mankind,” which explores what would have happened if the global space race had never ended, were already attracting 11.7 and 11.1 times more demand than the average TV show in the United States ahead of launch, respectively, according to Parrot. “Dickinson,” starring Hailee Steinfeld as poet Emily Dickinson, registered 3.3 times the demand average, while “The Morning Show,” a comedy-drama series starring Jennifer Aniston, Reese Witherspoon and Steve Carell, managed 1.8 times the average in the United States during that time period.

A separate Ampere Analysis survey found “The Morning Show” would appeal to 35% of Apple customers (versus 25% of non-Apple device owners). “See” has a similar and strong appeal.

“Apple has a different business model from the other new platforms in that it is able to use Apple TV+ to incentivize device replacement — and therefore generate larger cash flow through those sales to fund content spend,”

Minal Modha, consumer research lead at Ampere, said in a statement.

The analyst found that the main barrier to uptake of Apple TV+ is a lack of interest in the offered content, which Modha said is mainly due to Apple being new to the original content space and consumers not knowing what to expect.

“As Apple TV+ begins to roll, we expect this barrier will be overcome,” she said.

Parrot compared the pre-release U.S. and global demand for Apple TV+’s four top series to that of other hit streaming shows. For example, U.S. pre-release demand for the Apple TV+ series tracked well ahead of Hulu’s first season of “The Handmaid’s Tale” in the week leading up to their respective premieres. In its analysis, the company compared the average U.S. demand over the period Oct. 21-27 for the Apple TV+ series to “The Handmaid’s Tale” season one demand over its seven-day pre-premiere period April 17-23, 2017. Internationally, the Apple TV+ shows don’t fare as well. Pre-release demand for “The Handmaid’s Tale” in most international markets pre-launch was well ahead of the pre-release demand for the Apple TV+ series on a per capita basis.

“Based on the demand that we are seeing, Apple TV+ promotion of the series in the U.S. has put them in a position to succeed domestically,” Courtney Williams, head of partnerships at Parrot Analytics, said in a statement. “However, they have to rapidly accelerate their international marketing if they hope to be a key player in the global streaming wars. The advantage of active and ongoing hardware penetration will be key domestically and should provide the necessary foundation to drive demand globally.”

Max is Coming

WarnerMedia isn’t launching high-profile HBO Max until May 2020, but that didn’t stop the former Time Warner company from unveiling the service Oct. 29 in a gala-like event on the Warner Bros. lot.

Pricing for the service is $14.99 a month — identical to the current HBO Now streaming service, which is being folded into Max. It will be aggressively marketed to AT&T’s 170 million mobile, broadband and linear TV subscribers. An ad-supported version of Max will debut in 2021.

“Just like cable introduced the rise of niche networks to dramatically grow audience, general entertainment streaming is the next great opportunity to aggregate and grow audience,” John Stankey, CEO of WarnerMedia, told attendees.

WarnerMedia is set to spend upwards of $2 billion annually on original content for Max, in addition to mining a treasure-trove of catalog content from Warner Bros., HBO and Turner.

Max will bow with 31 original series, increasing to 50 series by 2021. In all there will be 10,000 hours of premium content at launch, featuring 1,800 movies, including current box office hit Joker.

Wedbush’s Pachter is “pretty confident” the 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.

Additional reporting by Stephanie Prange

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