Disney And Apple Take On Netflix In The Streaming Wars


The streaming video market
is about to get crowded. It is a giant arms race. The streaming landscape has
been getting more competitive. Linear TV, no offense to
what we’re doing right here, is in trouble. Netflix, Hulu, Amazon Prime
Video and others are about to come head to
head with the likes of Disney Plus, Apple TV Plus,
HBO Max and CNBC’s parent company
Comcast NBCUniversal. It’s been dubbed
the streaming wars. A lot of people are
figuring out where they want to position themselves for
the future of TV. In 2017, 61 percent of adults
18 to 29 year olds said they primarily watched
TV through a streaming service, compared to
just 31 percent who watched cable. There’s gonna have to be
winners and losers here. So who’s going to win,
what’s going to happen to cable, and what will
happen when customers have to pay just as much, if
not more, for all their streaming services as they
would have for cable? Are we headed toward a
future where an aggregator will simply bundled
together popular streaming services, and will the cost
of that be close to the cost that people
pay for cable? And the answer to that
may very well be yes. Let’s start with
who’s doing what. Disney announced the details
of its Disney Plus platform in April of 2019,
touting all of its franchises and acquisitions
like Marvel, Star Wars, Pixar, National Geographic
and 20th Century Fox. Disney has the best chance
just because of its very, very popular content
and the money and distribution and the Disney
name it’s put it behind. That’s going to
cost customers $6.99 a month or $69.99 a year. Most recently, Disney announced
it will also be offering a bundle, including
Disney Plus, ESPN Plus, an
ad-supported Hulu. Disney Plus and the bundle
will be launching on November 12th, 2019. We’ve partnered with
the most thoughtful, accomplished, and award winning
group of creative visionaries who have ever
come together in one place. Apple announced Apple TV Plus
at a keynote in March of 2019, which
will feature original content from some of
the most prominent producers and actors like Oprah
Winfrey, Steven Spielberg, Jennifer Aniston and
Reese Witherspoon. Apple TV Plus is set to
launch in the Fall of 2019, but the price
has not been announced. HBO Max is slated to launch
its beta in late 2019 and will feature content from
a variety of assets owned by its parent
company, AT&T and Warner Media. Warner Media hasn’t
released the pricing for HBO Max, though it’s
expected to be somewhere around $15 to
$18 a month. It will offer all of
the programming you already get on HBO, which
is probably the most competitive product in terms
of quality, plus it’s going to offer you
all of the programming that lives in the
Warner Brothers universe, whether it’s Friends or DC
Comics, and then you throw in original programming
on top of that. Viacom and CBS have
held extensive merger talks which would put them in
good standing for a streaming service. This service could include
the Star Trek movies, programming from Comedy Central
and shows that currently stream on CBS
All Access, CBS’ current streaming service that already
boasts 8 million subscribers. CNBC’s parent
company, NBCUniversal, is taking a more
cable-focused approach, which makes sense as NBC is
owned by cable provider Comcast. NBCUniversal announced
the service would be free to cable customers,
and while it hasn’t announced a cost for cord
cutters, sources say it will probably be $10 or
less per month for customers without
cable subscriptions. NBCUniversal’s product will
be ad-supported. So whether you are a
cable subscriber and you get the product for free or
you are a cord cutter paying $10 a month,
that product will have advertisements in it. All of these streaming
services have created multiple bidding wars from
networks to buy back their content
from Netflix. Warner Media will spend $85
million a year for the next five years to
stream its popular sitcom Friends. NBCUniversal will shell
out $100 million a year for the next five
years to take back the rights to stream its own
show, The Office. And Disney will be pulling all
of its movies from Netflix in 2019 as it
rolls out Disney Plus. These companies will also
be creating content specifically for their
streaming services. Netflix alone spent $12
billion on original programming in 2018 and is
expected to spend even more in 2019. Very, very few companies
can match that. OK, Apple could. You know much HBO
was spending on content? It’s about $4 billion a
year, like, Netflix is actually dramatically
outspending them. Hulu and Amazon invest large
sums of money in original programming, too, and
CBS has exclusive content for its All
Access streaming service that’s not available on
CBS’ TV station, like Star Trek Discovery. You absolutely need to have
your own original or at least
exclusive content. That’s how are you going
to drive people to a director consumer product
when you offer something that you
can’t get elsewhere. Netflix has gone from
largely reselling other people’s content to
really heavily investing billions of dollars in
original content that can’t be taken
away from them. So why now? Netflix has been serving
streaming content since 2007 and introduced its
first original show, House of Cards, in 2013. It was clearly on to
something, but most content creators wanted to see if
the trend stuck around. The more successful we
were at building an on-demand subscriber base with
content, the more likely they were gonna be
to stop licensing to us, right? It’s actually one of the
reasons why we started original content in the
first place, because we believed this shift
would all happen. It’s just taken many
years longer than we thought. For several years, while
Netflix gained in valuation, the party line
among traditional media executives was, ‘this is a
flash in the pan. What we want to do
is protect the cable bundle. We don’t want to
self-imposed the destruction of this. It’s our
golden goose.’ What has happened in the
past couple years is an evolution of thinking that
the bubble in Netflix is not actually
going to burst. In fact, Netflix stock rose
over 2000 percent from the beginning of 2013
to early August 2019. Now, with streaming content
solidified in the consumer market, content
creators and media outlets all want a
piece of the pie. The more choice they get,
the less they need the traditional cable bundle. And so what we should see
is more and more people cutting the cord or
cutting traditional cable. Cord cutting, the process
of ditching cable has been on the rise. The five biggest
cable companies collectively lost 3.2 million pay TV customers in
2018, and the high volume of streaming services
could push that number even higher. All of broadcasting
is in danger. The only people who
are willing to watch commercials are people who
can’t afford to buy the goods that
are being sold. That’s an existential,
long-term issue. But it’s not lights out
for cable just yet. There are things that
cable offers that streaming services don’t. The live news, the live
sports, that’s not yet included in these streaming
services and it has kept the traditional
cable bundle alive. It’s a jolting experience
to have to navigate multiple apps on a TV,
and so high level speaking cable is a great value
proposition from a product standpoint, bringing it
all together. And because the cable
providers are also providing the internet access to
make the streaming possible, they are
at an advantage. So everyone’s talk about
cord cutting, cord shifting, cable companies,
their businesses are just going to cord shift
onto a new medium that’s that’s Internet based. ‘So even if we lose you
and we only sell you broadband internet, we don’t
care because we’re only breaking even.’ Goldman Sachs calls this
the point of indifference. Analysts are also speculating
how this will affect big players like Netflix,
Hulu and Amazon. No one’s going to compete
with Netflix and grow subscribers. I believe they
have won the game. And I think that there’s
nothing that I can see that’s going to
dislodge them. There’s gonna be a
tremendous amount of competition coming in over the
next two to three years. I wouldn’t want to
be in a position of competing against Amazon,
Apple, Disney, Comcast, AT&T. Not only could streaming cost
as much as cable, but users would also
have to navigate a complicated and segmented
landscape of products to get to the
content that they want. Do people want to sign
up for six different streaming services. Everything is going to be
behind its own silos. It’s just creating a
fragmented media world. There might even be the
potential of a company to bundle all of these
products together under one umbrella product. Everyone’s talking about Apple
TV Plus. Where I put Apple into this
fight is there Apple TV app. Everything can be
watched and aggregated through the TV app. So what are the benefits? Well, customers will get to
pick and choose what services they want to
spend their money on. Don’t care about
Disney movies? Don’t get it service. It’s that simple. Consumers will have more and
more choice on what they choose to buy. And maybe they buy
three streaming services. Maybe they buy five. Maybe they buy one. We’ll have to wait and
see how this all shakes out. But some casualties
will be expected. There are simply too
many streaming products that the entire ecosystem won’t work
with all of them. I think some will see
return and some will realize we just put a lot
of money into something maybe we shouldn’t have.