July 13, 2020
With the entertainment industry still largely on hold due to the coronavirus pandemic, two over-the-top video services this week look to confirm the market reality and potential of subscription video-on-demand in an age of uncertainty.
Netflix, which releases second-quarter (ended June 30) financial results at the close of the market on July 16, is coming off a first quarter that blew expectations out of the park. The service added more than 15.8 million new subscribers worldwide (obliterating all projections), driving revenue and profit skyward while much of the entertainment economy came to a screeching halt.
NBCUniversal on July 15 formally launches Peacock nationwide to a saturated direct-to-consumer market featuring both subscription and ad-supported distribution options.
For Netflix, the week aims to justify renewed Wall Street salvos that saw the company’s stock balloon 8% at market close on July 10 to an all-time high of $548.73 per share. Netflix thinks it will quietly add 7.5 million new subs in Q2, while Goldman Sachs contends the streamer will add 12.5 million. Revenue is projected to skyrocket 123.5% to $6.o8 billion from $4.92 billion during the previous-year period.
“[Cautious sub growth] fails to capture the reality of Netflix’s earlier stage markets and a dramatically changing world that is pushing changes into every corner of consumer behavior,” Goldman Sachs wrote in a note, adding it thinks the SVOD pioneer will boast more than $100 million in free cash due to the dearth of new content production.
The Peacock bow comes as consumers face a plethora of choices driven by Netflix, Amazon Prime Video and Hulu, with newcomer Disney+ quietly achieving podium status with more than 53 million subs through May.
The $9.99 monthly Peacock without ads ($4.99 with commercials) will showcase NBC programming, including new and catalog, in addition to Universal Pictures movies and some third-party content.
Similarly to rival newbie HBO Max from WarnerMedia Entertainment, both services lack key distribution through third-party streaming devices Roku and Amazon Fire TV.
Neither platform is carrying Max or Peacock apps — critical to consumer adoption. At issue reportedly is the hosts’ mandate keeping third-party user data, including viewing habits and content choices. Both Roku and Fire TV would offer Peacock and Max on The Roku Channel and Prime Channels distribution platforms rather than as separate standalone apps as is the case for Disney+ and Netflix. Both Disney and Netflix maintain control of their user data.
“This severely limited the [Max] launch, considering that [Roku, Amazon] combined have a dominant market share and are the primary way a large portion of the population connects to SVOD,” Michael Pachter, media analyst with Wedbush Securities in Los Angeles, wrote in a July 7 note. “Commentary from HBO post-launch suggests that it is playing hardball with Roku and Amazon, and in our view it did not suggest that a resolution was imminent.”