Q1 earnings for media and tech companies are now behind us, so it’s a good time to recap how Netflix and its four biggest challengers — Amazon Prime Video, Disney+, Apple TV+, and HBO Max — stack up and are trending for the rest of 2021. Just 18 months ago, Netflix largely played alone. What a difference those months make for the reigning champ in these “streaming wars.” Now, Netflix faces giant global competitors seemingly around every turn.
Ditto for us consumers, as streaming became our activity of choice (frequently, our only activity!) during the past pandemic year’s global lockdown. While life during the COVID-19 pandemic has been the worst of times for most, it was the best of times for the major streamers. All benefited from essentially forced adoption of living room-first viewing behavior. But COVID merely accelerated pre-pandemic trends that signaled the continuing marginalization of out-of-home movie theater behavior. Now the train has fully left the station, and it ain’t coming back — even as the world opens up and we open our doors. We value the choice, convenience and economics of streaming way too much.
Of course, we consumers still have our limits. We can’t stream all of these mega-players. We have limited disposable income, and we vote with our wallets. So which major streamers are best positioned to win, and how are they trending for the rest of 2021?
NETFLIX – Bearish Trend
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First, the good news. Netflix remains the undisputed global leader amongst streamers with 207+ million paying subscribers. The bad news is that the red giant’s growth stalled significantly in Q1. Whereas Wall Street expected about six million new subs, Netflix delivered less than four. Netflix Bulls dismiss concerns about this “miss” as being much ado about nothing. Netflix simply pulled 2021 subscribers into 2020 due our collective Covid lockdown. So, it’s natural that 2020’s boon leads to early 2021 bust. Makes sense.
But not so fast. Netflix Bears (yes, there are some) have long flagged the fact that its US market is saturated and its dependence on continued international hyper-growth faces its own significant hurdles — including very different economics in mobile-first territories and localized competition. Netflix now battles not only Amazon for global dominance, but also faces global challenges from Disney, Apple and HBO Max (and those are just the major US players). Disney and Apple are two of the most powerful brands on the planet, and Disney and HBO Max both boast content franchises Netflix can’t match.
And while Netflix lives by subscribers alone, Netflix’s four major competitors use their streaming service as marketing for their much bigger machines. Amazon monetizes our shopping, Apple its hardware, HBO Max its AT&T wireless plans, and Disney its global theme park and merchandising.
Netflix certainly isn’t going anywhere anytime soon. But for the first time, Wall Street Bears are coming out of the woods. Netflix must diversify its business — like all of its massive competitors — or face ultimately being swallowed up by one of them. Netflix only expects to add one million new subs worldwide in Q2, and the next few quarters will be telling.
AMAZON PRIME VIDEO – Bullish Trend
The Bulls are out in force behind Amazon Prime Video. It’s hard not to feel confident about a service that plays by entirely different rules of the game and feels no pressure to succeed on its own. Whereas Netflix must make money from its streaming service to survive, Amazon Prime Video can justify its existence by functioning as marketing to draw us in, shop more, and feel better about the giant seemingly touching every aspect of our daily lives.
Amazon Prime Video is a massive global force already, with over 200 million paid subs, 175+ million of whom have streamed its movies and television over the past year. And now, for the first time, Amazon is openly challenging Netflix with gargantuan content spends. Amazon spent $11 billion on content in 2020, just behind Netflix’s $11.8 billion last year (Netflix plans to spend $17 billion this year). CEO Jeff Bezos is clearly upping his ante, and Netflix’s Reed Hastings must do the same if he wants to keep up.
DISNEY+ – Bullish Trend
In less than 18 short months, Disney+ has done what few thought was possible — crossed the 100 million paid subscriber count (about half of Netflix’s). And Disney packs a 1-2 punch that neither Netflix nor Amazon can match.
First, Disney is a global brand that is practically ingrained in our DNA. Disney indoctrinated us as kids, and we happily pass that on to ours. Second, Disney’s global franchises and content library are the envy of all others. There’s the Marvel universe, Star Wars, and Pixar, and don’t forget the Disney Princesses and new Avengers and Avatar franchises that came courtesy of Fox. That’s a wealth of evergreen content that us and our kids will watch over and over again — and Disney can continuously mine for future subscription gold.
Most still don’t understand that Disney+ is just beginning. In a galaxy not so far far away, we will see Disney+ for what it really is — the door to Disney’s entire Magic Kingdom, where different tiered subscribers will receive different tiered benefits (monthly theme park offers, plush toys for our kids, etc.). Disney+ marks a fundamental transformation of Disney’s business model from single transactions to recurring revenues a la Amazon Prime.
Plus, let’s not forget that longtime Netflix annoyance Hulu is part of the Disney family. The Mouse House plans to aggressively expand it internationally this year under its “Star” banner.
APPLE TV+ – Neutral
Apple TV+ is not terribly exciting to most in Hollywood. There continues to be a relative dearth of compelling original programming compared to the other giants. But CEO Tim Cook is in it for the long run. Imitation is the highest form of flattery in these streaming wars, and Apple — just like Disney — ripped a page from Amazon’s Prime playbook and placed Apple TV+ into its Apple One subscription bundle. Just like Disney+, Apple One is still in its early innings.
Apple tops a $2 trillion valuation now despite relatively anemic revenue growth over the past several years (although its latest quarter was a blockbuster), because investors love the fact that Apple One recurring revenues take increasing share. Apple TV+ plays the same marketing role for Apple that Amazon Prime Video plays for Amazon — the content is used as marketing to draw us in and keep us there. Content is “friendly” and warm. Hardware is colder. That’s why Apple just announced a major expansion of its L.A. studios to pump out more originals.
Apple can, and will, leverage its massive international presence to challenge Netflix and the others at every pass.
HBO MAX – Bullish Trend
Slow out of the gates, AT&T’s HBO Max is picking up steam fast and now approaches 50 million paid subs. Its trick to get things back on track? Using the pandemic to do what (and other studios) wanted to do for a long time — release its entire film slate for in-home streaming on day 1, breaking decades-old theatrical windows in the process.
Yes, many in Hollywood jeered at new studio boss Jason Kilar’s decision. But investors cheered what they believed to be inevitable. Although HBO Max will retreat somewhat in 2022, its new day 1 star power — Wonder Woman 1984; Godzilla vs. Kong — catapulted HBO Max back into the conversation as being a real streaming contender.
A whole new international world awaits HBO Max, which is chock full of global franchises second only to Disney’s on this list. The streamer plans to roll out across 60 new territories.
The epic premium streaming battle is on. Knives are out. And the Fearsome Foursome wants to inflict 1,000 cuts on the reigning champ. As they say in the movies (specifically, Jeff Goldblum’s The Fly), “Be afraid. Be very afraid.”
Peter Csathy is the Founder and Chairman of CREATV Media (“Creative Media”) and CREATV University (“Creative U”). Subscribe to his FEARLESS MEDIA podcast, sign up for his newsletter, or follow his YouTube channel. He also tweets.
