Investors brace for streaming war as rivals take on NetflixThursday August 25 2022
Netflix had 220.7 million subscribers at the end of June 2022, despite losing 970,000 during the quarter. As a result, as the stock fell sharply, investors expressed their desire to replace it with Nvidia in the FAANG tech stocks.
FAANG stands for the big five US tech stocks: Facebook (Meta), Apple, — Amazon, Netflix and Google. However, there is a new giant in town and the streaming wars are just getting started.
In July, video streaming in the US surpassed cable television for the first time, accounting for 34.8 percent of total TV consumption, while cable TV trailed at 34.4 percent. Broadcast media had 21.6 percent, demonstrating the shift in consumer trends in which Americans prefer to watch content on demand.
According to a new report by Grand View Research, Inc., the global video streaming market is expected to reach $330.51 billion by 2030, driven by a shift in consumer trends, the use of artificial intelligence and blockchain technology, with a compounded annual growth rate of 21.3 percent from 2022 to 2030.
Netflix has long been the streaming powerhouse, with 220.7 million paying subscribers. Disney, on the other hand, has surpassed Netflix with 221 million streaming subscribers from its collection of streaming services, which includes Disney+, Hulu, ESPN+, and Star+. The current 152.1 million paying subscribers represent the fastest growth in any streaming service since the launch of the Disney+ streaming service in November 2019.
While Netflix is experiencing a drop in subscriber numbers, Disney is enjoying a higher number of subscribers and is looking to expand its reach even further. Disney counts subscribers based on unique service subscriptions. A household with Disney+ and ESPN+ subscriptions would be counted as two subscribers.
Because of high inflation rates, consumers are becoming more sensitive and selective about their spending on streaming subscriptions, affecting streaming demand and piling pressure on sales revenues.
In addition, young adults spend more time on popular social media app TikTok, reducing the time spent streaming paid services like Netflix and Amazon Prime.
Tik Tok has 1.39 billion users, of which 1 billion are monthly active users (MAUs). Only Facebook (2.9 billion), YouTube (2.5 billion), WhatsApp (2 billion), Instagram (1.4 billion) and WeChat (1.2 billion) have more MAUs than TikTok.
With YouTube, Instagram, and other platforms copying TikTok features to attract more views and engagements, young people may find themselves spending more time on these apps compared to streaming services like Netflix and Disney+.
Because its subscriptions are more expensive, Netflix has a significantly higher average revenue per user (ARPU). It has an ARPU of $15.95 in the US and Canada, compared to Disney's $6.27. While Disney has the most subscribers in the Asia Pacific region, its ARPU of $1.20 lags behind Netflix's $8.83.
Disney is attempting to close this gap by raising its Disney+ subscription prices by 38 percent in December. It will also continue to offer an ad-supported package for $7.99, a $1 increase.
One significant difference between Netflix and Disney is that Walt Disney is 99 years old, whereas Netflix is 25 years old. This means that Walt Disney has survived more economic cycles and developed content for more generations across different technologies.
When faced with difficult budget choices due to high inflation and rising interest rates, young adults find it easier to cancel Netflix subscriptions; however, young parents find it more difficult to cancel Disney subscriptions because the majority of the content is curated for children.
Walt Disney nearly lost the cricket streaming rights for the India Premier League (IPL) to Viacom18 in June. Cricket is India's most popular sport, with an estimated 2.5 billion people worldwide following the game. India is a huge revenue generator for Disney, and CEO Bob Chapek has promised to increase worldwide Disney subscriptions to 230-260 million subscribers by 2024.
To capitalize on the opportunity presented by the streaming wars, young adults should be more than just consumers of these products. A better way to profit from these wars is to download a stock trading app, such as the FXPesa app, and start with one share.
These companies hire top talent and have sticky products to which we have long subscribed. A top professional may be getting up early on Monday to work for a video streaming company solely to make a profit that benefits you as a shareholder.
The writer is a lead markets analyst at FXPesa