What is the Future of Streaming Services?

By Kirsteen Mackay

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As Netflix (NASDAQ: NFLX) subscribers dwindle, the streaming giant embraces advertising. Here we consider the outlook for this, and several other, streaming giants.

This article looks at the state of streaming giants and considers their future. Some of the companies covered include Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), Disney (NYSE: DIS) and Comcast (NASDAQ: CMCSA)

The entertainment industry is a fast-paced and evolving world with many moving parts. While streaming has come to dominate in recent years, so has the way networks reach out to potential viewers and subscribers. With Netflix, Amazon, and Disney recently disappointing shareholders, the sense of urgency to create fantastic content and cultivate a loyal fanbase has never been greater.

Netflix Embraces Advertising

After a pandemic boom, Netflix subscriber numbers began to dwindle, and the network looked to be heading for a crisis. Not one to capitulate, Netflix surprised shareholders with a pivot to advertising. Now the company plans to offer an additional payment tier, cheaper than its current offerings but complete with adverts. Microsoft is thrilled to be named Netflix’s technology and sales partner in this endeavor, helping power its first ad-supported subscription offering.

Furthermore, Netflix is also planning to pursue a franchise strategy. This means building its own version of Star Wars, the Marvel Cinematic Universe, or James Bond. It began with ‘Stranger Things’ and hopes to continue in this vein with ‘The Gray Man.’

Developing a franchise of characters and themes viewers will love for generations has driven Disney's success and is why Amazon bought the rights to the Lord of the Rings and the works of Roald Dahl. This angle has the potential to reap the rewards far into the future but requires considerable monetary investment, which only the biggest players can justify.

That is unless the streamers can adopt strategic ways of engaging new audiences.

Demand For Streaming is Rising

Recently, the number of streaming services on the market has risen, and households are increasing the number of services watched each month. According to COMSCORE’s State of Streaming webinar, 5.4 streaming services were watched per household in March 2022, up from 4.7 in the previous two years.

According to the same source, Netflix takes the crown for hours watched per week, followed closely by YouTube and then Hulu. Amazon Prime Video, HBO Max, and Disney+ consecutively come fourth, fifth and sixth.

While Netflix previously stated it would never introduce advertising, needs must, and the COMSCORE data shows this may be what the consumer wants. Americans are adopting ad-supported streaming services faster than non-ad subscription-based services. As the threat of recession looms, it seems free or affordable ad-supported streaming channels are the order of the day.

Consumer Engagement

The future of streaming depends on cost and engagement. Investing in shows and brands with a long shelf life is part of the puzzle, while engaging potential viewers is another. Advertising is likely to remain critical to this, along with collaborations, including influencer outreach. 

Franchised content works particularly well with influencer audiences because fans recognize the characters, brands and themes. Preconceived notions can be tested and emotions triggered. It’s a compelling way to connect brands with consumers and will likely become a critical part of broadcast marketing. 

According to the COMSCORE report, social media presents a prime location to share content, opinions, and anecdotes. Netflix dominates social media with clips, videos, images, and interactive content posts. Disney+ also drives engagement in this way. This will likely continue to be an essential traffic driver for the major streaming platforms.

Netflix (NASDAQ: NFLX) is seeking an executive to lead the creation of its new ad-supported tier. It’s rumored to be sizing up candidates from Comcast and Hulu. In the wake of Netflix’s Q2, 2022 earnings, the NFLX share price rallied 25%. Global subscriber losses and thus revenue fell less than expected, giving shareholders a pleasant surprise. Nevertheless, Netflix still faces a challenging backdrop against rising competition and a strong US dollar, which weighs heavily on its profitability.

Amazon (NASDAQ: AMZN) Prime Video is reportedly undergoing an interface redesign to be rolled out shortly. The plan is to give it a modern look and feel, dynamic visuals, a new live TV hub, and improved search. This should make it easier for viewers to find and watch content on Amazon Prime. The new UI design has been in development for around 18 months. 

Walt Disney (NYSE: DIS) is also bringing in an ad-supported tier to attract new subscribers allowing advertisers to reach a wider audience. Disney+ has Hocus Pocus 2 due out this year and just announced the latest addition to the Marvel Cinematic Universe, Daredevil: Born Again, an 18-episode live-action TV show due out in Spring 2024. Last month the Walt Disney Company Board of Directors unanimously voted to extend Bob Chapek’s contract as CEO for three years. 

Comcast (NASDAQ: CMCSA) is a global media and technology company. Comcast owns Sky, Universal, and NBC, among others. Comcast’s Board of Directors declared a quarterly dividend of $0.27 a share payable on July 27, 2022, to shareholders of record as of the close of business on July 6, 2022. Comcast Advertising is the advertising division of Comcast Cable. Comcast Advertising fosters powerful connections between brands and their audiences and among publishers, distributors, agencies and other industry players.  

According to COMSCORE’s State of Streaming report, “The Big 5” streaming services became “The Big Six” with the rise of HBO Max. This includes Netflix, YouTube, Amazon Prime Video, Hulu, HBO Max and Disney+. YouTube is owned by Alphabet (NASDAQ: GOOGL), and HBO is owned by AT&T (NYSE: T). But these six are not the only players competing for viewership. Apple (NASDAQ: AAPL) and Paramount (NASDAQ: PARA) are also rivals.

Ampere Analysis research showed Apple TV+ and Paramount+ are the most widely chosen platforms for viewers switching video-on-demand subscriptions. In its report, 11% of switchers chose Apple TV+ and Paramount+, while Netflix came in third place.

Report author and analyst at Ampere Analysis Ben French said:

Switchers are experimenting with different platform mixes within the home, moving spend to some of the newer and less penetrated services while maintaining a core base of services. It’s some of these newer, smaller services that the incumbent streamers most need to keep an eye on.

Although the North American and European streaming jurisdictions are becoming saturated, there are still growth opportunities worldwide for these companies to tap into. And as Netflix has shown with its unexpected pivot to advertising, these determined streamers are prepared to do what it takes to thrive in the fast-changing environment.

Alphabet (NASDAQ: GOOGL) shares slipped after completing a 20-for-1 stock split that failed to impress. The YouTube owner has fallen more than 20% since it announced the split in February. 

HBO owner AT&T (NYSE: T) has seen its share price endure a volatile year. It is currently down 3% year-to-date. The market saw AT&T's latest quarter disappointed shareholders, but the company offers a 6% dividend yield and HBO’s recent performance and substantial subscriber gains could give the company long-term appeal. AT&T’s Q2 results missed analyst estimates on free cash flow and lowered its guidance for the rest of the year.

Apple (NASDAQ: AAPL) and Major League Baseball (MLB) announced the August 2022 “Friday Night Baseball” schedule. Scheduled games continue to be available to watch for free, only on Apple TV+. Game assignments for “Friday Night Baseball” broadcasters will be announced weekly.

Apple’s conference call to discuss its Q3 earnings results and business updates is scheduled for Thursday, July 28, 2022, at 2:00 pm.

Paramount (NASDAQ: PARA) earned 86 Academy of Television Arts & Sciences 74th Primetime Emmy Award nominations across its combined portfolio. This marks the most nominations for the company since the merger of Viacom and CBS in 2019.

Paramount+ picked up 11 total nominations, CBS Television Network earned 28 nominations, and MTV Entertainment received 18 nominations, led by Comedy Central's "The Daily Show with Trevor Noah" and VH1's "RuPaul's Drag Race." Meanwhile, SHOWTIME® Earned 17 nominations, including Outstanding Drama Series, Outstanding Lead Actress In A Drama Series and Outstanding Supporting Actress In A Drama Series for "Yellowjackets".

Fox (NASDAQ: FOX) is celebrating the success of its business network. In Q2, FOX Business Network (FBN) became the number one network in business day and market hour viewers, easily outpacing CNBC according to Nielsen Media Research. “Kudlow” and “Varney & Co.” continue to reign as the most-watched business programs by total viewers. FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Meanwhile, Fox News was the most-watched cable news network during Q2 and Fox’s “The Five” was the top-rated program across cable news.

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In this article:

Topics:
Streaming Services
Entertainment
Media and Entertainment
Industries:
Information Technology
Companies:
Netflix
Amazon
Walt Disney
Comcast

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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