Which Company Will Lose the Most From Disney+?
It’s no secret that cord cutting is on the rise, and investors are demanding more content to be streamed to reach these eyeballs.
Over the Top Services, the term used for the delivery of film and TV content via the internet, without requiring users to subscribe to a traditional cable or satellite pay-TV service, is on the rise. Disney (NYSE:DIS) is the latest company to enter the market, with its much anticipated Disney+ streaming service -- which brings its entire move library plus original TV shows -- launching later this year. But is there a limit to the amount of OTT content the market can handle? Which companies will be the winners and losers?
Disney+’s Impact on the OTT Market
Disney+ will be launching this fall, at a time when the OTT market is becoming crowded. Some traditional television networks, in addition to news and sports networks, have launched services to stream their content to consumers and there are the traditional incumbents like Netflix (NASDAQ:NFLX), and Amazon Prime(NASDAQ:AMZN).
With Disney+’s sizable library, content from Disney, Pixar, Marvel, LucasFilm and assets it acquired from Twenty-First Century Fox, like National Geographic, would be available on the service, analysts view it as one of the most competitive streaming services -- especially considering its price point of $6.99.
A recent UBS Evidence Lab Media Consumption survey shows 43% of respondents were interested in subscribing to Disney+. To model this out to the entire US market, UBS says it would equal approximately 20% to 30% penetration of US broadband households. Where things get interesting is when the survey asks how many streaming services people would pay for. The survey says 50% of respondents would only pay for one service, while nearly 40% said they would pay for two to three, and only about 10% said they would pay for more than four.
Ultimately the considering factor for OTT subscribers will be content, and types of content. Although a market exists of consumers that subscribe to multiple OTT services, it’s likely that those which subscribe to over three services would not add another when they perceive the content category to be overlapping. For instance, a subscriber may opt for Disney+ and Apple TV+, or Netflix and Disney+ but then a news, or a sports service so they have a diversity of content available.
Laughing in Los Gatos and Concern in Cupertino?
The big question on many executives’ mind is which OTT company will lose the most from Disney+’s entrance into the market. It’s possible to forecast the winners and losers by looking at some data points from surveys, and also by looking at the install base of streaming devices.
Two recent surveys have demonstrated that if consumers had to pick, they would stay with Netflix, with only a few choosing to abandon ship. An April survey from research firm Hub Entertainment Research (US respondents, N=1700) showed that if consumers had to abandon one streaming service to get Disney+ 44% would keep Netflix, while 29% said they would keep CBS All Access. Another survey, by Streaming Observer (US Respondents, N=602), showed that a majority of respondents planned to either stick with their Netflix subscription, or subscribe to both Netflix and Disney+. Just over 60% said they have no plans to ditch Netflix, 20% said they would subscribe to both, while only 2.2% said they would cancel Netflix.
What about Apple TV+? How will it compete when Disney+ launches? The service is slated to launch in the fall, and promises nearly two dozen original series within its first year. Apple (NASDAQ:AAPL) says that the service will eventually be compatible with non-iOS devices, but will start out as an exclusive to iOS and a few smart TV models. The problem Apple will face is that its install base is limited when compared to natively agnostic streaming devices (meaning that a user by default will not be loyal to one streaming service as all are available on the platform).
Data from Parks Associates shows that the install base for Apple TV is only 13%, compared to an install base of non-Apple TV devices of approximately 86%. Even if Apple TV+ is available to these users, it will have an uphill battle with competing services that are already entrenched on the device -- including Disney+. As Disney+ has a strong category overlap with Apple TV+, people might be hesitant to replace their current subscriptions with Apple TV+ -- when it eventually becomes available. Even if Apple TV+ is available on select smart TVs, many consumers already have a streaming device attached to the smart TV, and prefer to bypass it in favour of the streaming device.
Get Ready for Consolidation
Hardcore segmentation is not what consumers want. All data shows that consumers are getting frustrated with the emergence of walled gardens of content and would prefer more centralization.
An early 2019 survey from Amdocs quantifies this frustration. It says that 70% of US respondents are prepared to pay for a single provider that could package all of their preferred content into a dedicated service bundle.
Is this the sort of market that needs more OTT? Or is it time for consolidation? This, ironically, might look more like the system that predates OTT: some companies handle the content, and others bundle it together and serve it to the consumer.
Good luck, Apple TV +.
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