As cord-cutting becomes a growing phenomenon, we examine the leading over-the-top (OTT) platforms to look out for in 2020.
Feb. 17, 2020
More and more Americans have cut the cord from their cable boxes and embraced streaming services like Netflix (NASDAQ: NFLX) and Disney+ (NYSE: DIS). The reasons are obvious: they’re significantly less expensive and they offer viewers a massive amount of content on demand.
Netflix was the first such service on the market. It was the top stock of the 2010s with gains of about 4,150%. Netflix is known for its substantial original programming and often outbids competitors’ offers for talent, programming, and/or budget. Content expenditure is expected to reach $17.3 billion this year. These high expenses forced the company to raise its subscription rates by $2 (to $12.99) in 2019, thereby losing about 130,000 U.S. subscribers in Q2 of 2019 and roughly 10% in its stock price as a result. In Q3 and Q4 of 2019, the company continued to underperform in subscription rates in the U.S., due this time to rivals like Disney+ and Apple TV+ (NASDAQ: AAPL) making their debuts.
Competition isn’t the only problem Netflix faces. Along with being a viable competitor, Disney+ is also removing its titles from Netflix, depleting the company of its Marvel, Pixar, and Star Wars offerings. Netflix will also lose two highly popular shows, ‘The Office’ (2021) and ‘Friends’ (2020) to NBCUniversal’s Peacock (NASDAQ: CMCSA) and WarnerMedia’s HBO Max (NYSE: T) respectively. The service, although underperforming in the United States, continues to grow in international markets. Netflix has approximately 160 million subscribers.
On November 12, 2019, Disney+ made its debut and was met with extraordinarily high demand, shutting down some of Disney’s servers due to high user volume. Disney+ is a formidable adversary for Netflix with its incredible catalog of films and a highly popular series, ‘The Mandalorian.’ In fact, Disney+ owns seven of the last 10 top-grossing films of the year.
As of February 3rd, Disney+ has 28.6 million subscribers, beating Wall Street’s prediction of 25 million. Disney is very much aware of the importance of content and had foregone $150 million in licensing revenue before launching its service. It is optimistic about its streamer’s growth and expects 60 to 90 million subscribers by 2024, while its content budget is expected to grow from approximately $1 billion this year to $2.5 billion by 2024.
Amazon Prime Video is a service that is offered to members of Amazon Prime, a free two-day delivery plan, for $12.99 a month. Recently, Amazon (NASDAQ: AMZN) has won the rights to ‘The Lord of the Rings’ prequel series, outbidding Netflix to the tune of $250 million. The production budget for the show is expected to exceed $1 billion.
With nearly 100 million global subscribers, Amazon Prime Video is expected to contribute $3.6 billion in revenue to its parent company this year, but more importantly, it’s a positive influence on Prime subscriptions and renewals, which are a huge moneymaker for the company.
Apple TV+ entered the streaming arena on November 1, 2019, with a very modest offering of programming. The main complaint users immediately had was with the unintuitive interface of the streaming service through the app and missing features people have come to expect in an OTT platform (like previews and continuation alerts). The service costs $4.99 a month.
In terms of content, Apple is spending the same amount as Amazon, $6 billion, in 2020 on future programming. It does not have a library of third party licensed shows. Apple TV+ has amassed 33.6 million subscribers thus far, mainly by offering a year’s subscription for free with the purchase of an Apple product.
NBCUniversal is launching Peacock nationwide on July 15, 2020. The service will offer films from Universal, Focus Features, DreamWorks Animation, and Illumination as well as extremely popular television programs like ‘The Office’ and ‘Parks and Recreation.’
This service will come in three tiers, including a free package (with ads and limited content). Ads, of course, mean more revenue for the company. Other options include a $4.99 plan for existing Comcast customers or a $10 premium plan without ads and access to the full library for non-customers. NBCUniversal expects subscribers to number between 30 and 35 million by 2024. The company expects to be bringing in $2.5 billion in revenue by that time as well.
The content offered by the different services is different enough to warrant co-subscriptions. Disney+, for example, is ideal for family and youth programming and can be a perfect complement for Netflix or Amazon Prime Video (or even both). The bottom line is that even if people wanted all of the reviewed services, the cost would still be about a quarter of what they would pay for cable for a vastly more versatile product.
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