Zoe, Elmo and The Count at the Sesame Workshop’s 16th Annual Benefit Gala at Cipriani in New York City in May.
Michael Brochstein | SOPA Images | LightRocket | Getty Images
The coronavirus outbreak may lead to the first U.S. recession in more than a decade, but it could be a bonanza for the companies competing in the streaming wars.
If Americans are stuck at home in the coming months as schools close and events are canceled, they’ll likely be starved for entertainment options and new ways to keep kids entertained. It just so happens that several new streaming services — NBCUniversal’s Peacock, WarnerMedia’s HBO Max and Quibi — will be debuting between now and May.
Add to that the relatively recent launches of Disney+ and Apple TV+, and streamers could see a significant subscriber boost if Americans are forced to hunker down to slow the spread of COVID-19. Investors will be paying close attention to subscriber numbers as subscription streaming goes from a game largely dominated by three players — Netflix, Amazon Prime and Hulu — to a world where a dozen or so players will attempt to carve out space as profitable alternatives.
“If people are sitting at home, can’t go to the movies, and all you have to do is hit one button and it’s a tenth of the price of cable, why would this be bad for subscriber growth?” Rich Greenfield, a media analyst at LightShed, said in an interview. “All the streamers will benefit.”
Evidence of a streaming boom has already occurred in China, where usage of China’s top streaming apps surged in early February as residents headed indoors, according to Apptopia.
The newcomers will need strong word-of-mouth
The next three entrants to the streaming wars will be:
Quibi, the short-form streaming service founded by longtime entertainment executive Jeffrey Katzenberg and run by former eBay and Hewlett Packard Enterprise CEO Meg Whitman, debuts April 6. Its short-form shows will include “The Most Dangerous Game,” starring Liam Hemsworth and Christoph Waltz, and “Barkitecture,” a show about building dog houses. Quibi will cost $4.99 per month with advertisements and $7.99 per month without ads.
Peacock. Comcast, which owns NBCUniversal, is giving cable subscribers free access to Peacock starting April 15, and wide release is set for July. Peacock will have a free tier and a paid tier, both with ads ($4.99 per month) and without ads ($9.99 per month). Peacock will be the eventual streaming home of old NBC shows including “The Office” and “Parks and Recreation” and will feature new originals including a reboot of “Saved by the Bell” and “Dr. Death,” starring Alec Baldwin and Jamie Dornan, based on the true-crime podcast.
HBO Max, from AT&T‘s WarnerMedia, is slated to debut in May. It will include 31 original series in 2020 and 50 original series in 2021. HBO Max will also have a slate of new kids’ programming, such as episodes and spin-offs from “Sesame Street” and “DC Super Hero High,” which follows a group of kids at a boarding school who don’t realize that they will eventually become superheroes. (WarnerMedia owns DC Comics.) HBO Max will also include everything from HBO and will cost $14.99 per month — the same price as HBO.
Early subscriber growth could be key to success in a crowded streaming world. While not every show will be a hit, services will need several near-viral successes to create a network effect that will keep subscribers paying after promotions end.
Disney+ claimed nearly 30 million subscribers in just three months, but other services won’t be able to rely on a deep catalog of well-known movies and brands, such as Star Wars, Pixar and Marvel. A service such as Quibi, for example, which has no library content and will be relying solely on the quality of its new programming, will need word-of-mouth hits to gain traction.
Quibi may be the least well-positioned of the new services because its content is supposed to be viewed on phones and in moments of downtime, such as waiting in line, said Kirby Grines, the founder of 43Twenty, a strategic advisor for direct-to-consumer video.
“Quibi’s play is on mobile, when the sick will most likely be huddled in front of a TV,” said Grines.
What about Netflix?
Needham & Company analyst Laura Martin released a note Tuesday arguing that the coronavirus will be a net negative for Netflix, the largest global streamer of all. It’s unlikely the virus will add new U.S. subscribers given Netflix’s relatively high cost of $9 to $16 per month, Martin wrote, noting that if existing subscribers watch more hours on Netflix, that won’t turn into any additional revenue for the company because Netflix doesn’t monetize through advertising. Internationally, Netflix subscribers may churn at higher rates if paychecks stop for elongated periods of time.
Still, prolonged quarantines of potentially millions of people could give Netflix a rare opportunity to prove its value proposition to a new audience after U.S. growth has plateaued over the past year at around 60 million U.S. subscribers. For context, about 85 million U.S. households still subscribe to a traditional form of bundled pay TV (i.e., cable or satellite), according to research firm eMarketer.
While a $10 or $15 per month cost may have previously been a barrier to entry, Americans may view streaming as a relative bargain if they’re saving money by eschewing live entertainment and going out to eat at restaurants. Then again, if macroeconomic conditions continue to deteriorate, consumers may view eliminating streaming services as easy ways to save money.
“Netflix will have fresh content every day for the next 12 months,” said Greenfield, adding, “I cannot fathom any investor looking at the horrible coronavirus pandemic as a negative for Netflix, but [Martin] is welcome to her own personal views.”
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
