UK Markets close in 2 hrs 11 mins

Disney, Apple Join Streaming War, Netflix Might Take a Backseat

Zacks Equity Research


Will Pricing War Take a Toll on Streamers?  

Disney+ comes in at a competitive price compared with both Netflix and the recently-released Apple TV+.

While Disney+ costs $6.99 per month, the company is also offering a bundle package of Disney+, ESPN+, and ad-supported Hulu for $12.99 a month. This alone is anticipated to be a game changer in the streaming service space.

However, it would be foolish to ignore Apple’s aggressive pricing strategy for Apple TV+. At $4.99 per month, it has undercut the pricing of every other streaming service provider.

Established players like Netflix and Amazon, as well as new entrants like Disney+, NBCUniversal’s Peacock and HBO Max are expected to face a difficult time keeping up with Apple TV+’s rock-bottom pricing.

Moreover, HBO Max, set to be introduced in May 2020 at $14.99 a month, is lesser by $1 than Netflix’s costliest plan.

Meanwhile, Amazon Prime Video costs $8.99 a month, while Prime members, paying $12.99 per month for shipping and shopping deals, receive services inclusive of both.

The lower prices will surely make it difficult for users to select an appropriate service for their video streaming appetite. However, the cut-throat price competition is expected to be detrimental to finances of companies like Netflix. Notably, the streaming giant has a content obligation of almost $19 billion in its balance sheet.

Netflix in a Fix

Although Netflix is still the largest streaming player globally, lack of content from Disney’s Marvel-Pixar hits is expected to hurt its ability to add subscribers globally.

Moreover, competition to gain exclusive rights to classic TV shows has intensified among streaming-service providers and might hurt Netflix.

Hulu has grabbed the rights to ER. Disney, Amazon Prime and HBO Max secured rights to The Simpsons, Sex and the City, and Friends and The Big Bang Theory, respectively. In the meantime, Peacock acquired exclusive rights to The Office.

This apart, the entry of Disney and Apple is expected to hurt Netflix’s ability to gain shares, particularly in the price-sensitive Asia-Pacific markets.

Additionally, Apple’s robust original content portfolio for Apple TV+ that includes shows of different genres like See, The Morning Show, Dickinson, For All Mankind and The Elephant Queen is a key catalyst.

Disney+ also features old and new content from its namesake brand, Pixar, Marvel, Star Wars, National Geographic, and others.

Per a Reuters report, the 10 million sign-ups on the very first day of Disney+ streaming highlight its consumer demand. Disney+ is expected to have between 60 million and 90 million subscribers globally by the end of fiscal 2024.

Furthermore, Netflix is expected to produce more original shows, in a bid to retain its market share amid stiff competition, which, in turn, is likely to escalate its content cost in the near term. Notably, the company is expected to spend $15 billion by the end of this year.

Meanwhile, Netflix recently struck a multi-year deal with Viacom’s division — Nickelodeon — to produce original animated movies and series for the streaming giant based on the kids television network's library of characters as well as new IP.

Disney+ to Enjoy an Upperhand

Disney’s last-minute decision to make its latest service available on Amazon Fire devices was a vital bailout for Amazon. Amazon Fire’s competitor, Roku, already had access to Apple TV+ and Disney+. Disney’s strategic decision will not only give Amazon an edge over Roku, it will also boost penetration ability of the former.

Zacks Rank

Disney, Apple, Netflix, Roku and Amazon currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Click to get this free report The Walt Disney Company (DIS) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Roku, Inc. (ROKU) : Free Stock Analysis Report To read this article on Zacks.com click here.