Advertisement
U.S. markets close in 32 minutes
  • S&P 500

    5,262.10
    +13.61 (+0.26%)
     
  • Dow 30

    39,849.53
    +89.45 (+0.22%)
     
  • Nasdaq

    16,401.13
    +1.61 (+0.01%)
     
  • Russell 2000

    2,124.20
    +9.85 (+0.47%)
     
  • Crude Oil

    83.07
    +1.72 (+2.11%)
     
  • Gold

    2,241.50
    +28.80 (+1.30%)
     
  • Silver

    24.97
    +0.22 (+0.88%)
     
  • EUR/USD

    1.0791
    -0.0039 (-0.36%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2623
    -0.0015 (-0.12%)
     
  • USD/JPY

    151.4010
    +0.1550 (+0.10%)
     
  • Bitcoin USD

    70,730.09
    +1,969.23 (+2.86%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Streaming content companies: Who's strong, who's weak?

Ever wonder why there are so many awesome TV shows to watch these days? It’s in part because streaming content— particularly TV shows and movies—is arguably the hottest business on the planet right now, both in terms of consumer and investor interest. There are a number of key players jockeying for position in this super competitive field, and while Netflix, HBO, Amazon, and Hulu are by no means a homogeneous set, each one is after the same prize: precious discretionary eyeball time, particularly in the U.S. market.

Almost every day at least one of these companies makes some sort of major announcement that sends all of us scrambling to sort through the fuss. One way to look at all this is to consider if these companies are making moves from a position of strength, or a position of weakness. While I don’t think for a minute this is a winner take all game—i.e., there will always be multiple options here—at the very least some companies will no doubt flounder while others will soar. Here’s my take as of now.

NETFLIX: A darling of the now stalled out bull market, Neflix’s greatest strength is that it is 100% focused on this business and has an impressive track record of adapting and executing. Some of its latest moves include not renewing its deal with Epix, which means no more “Hunger Games” and “Transformers” for Netflix customers, rolling out a pricey original series, “Narcos,” and moving into the tricky Japanese market. While some may question all these moves, I would argue that they’re made from a position of strength. True, Epix has been big for Netflix. Variety reports that “Netflix subs have streamed an average of 75 million Epix movies per month, according to a source familiar with the pact, which would represent about 1.8 movies per U.S. sub monthly,” but expendable from CEO Reed Hasting’s standpoint, because it was a non-exclusive deal. He is pushing the business more and more into originals for his 65 million-plus subscribers, like “House of Cards,” “Orange is the New Black,” and now he hopes “Narcos.” Speaking of the latter, Hastings was recently touting the new show on his Facebook page. Now that’s an engaged CEO! Hastings has always had HBO envy but he’s now well on his way toward matching his competitor in some ways, which had long dismissed him as small potatoes. Five years ago Time Warner CEO Jeff Bewkes, when asked about Netflix by the New York Times, said: “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.”Today, while Netflix still has only $6 billion in revenue, it has a market cap of $42 billion, while Time Warner, with $28 billion in revenue, has a market cap of $56 billion. As for Japan, believe it or not, the country is still a DVD-dominated market, but that’s OK because Netflix isn’t going there for quick-hit growth. Rather, this is a long game move in a major market.

HBO: Speaking of HBO, that company has long been the gold standard of producing original content, from “The Sopranos” to “Game of Thrones.” Long the crown jewel of Time Warner, and the division that produced Jeff Bewkes, HBO and its 30 million subscribers who pay $15 a month, has been a major driver of the slimmed-down TWX, now that it has rid itself of Time Warner Cable, AOL and Time Inc. Over the past five years Time Warner’s stock has climbed some 130%, almost double the gain of the market, even after a recent swoon by content stocks. HBO wins because it’s a leader, constantly pushing the envelope, from cranking out super-creative, ultra-expensive programming (“Game of Thrones” costs $6 million per episode) to experimenting with cord cutting via its new HBO Now offering available on Apple devices. I’d call all that strength.

HULU: You could look at this consortium-owned streaming service two ways. 1) It’s a significant business with over nine million subscribers, but one that has kind of stumbled along with a failed IPO and a takeover that didn’t come to fruition both early this decade. Or 2), it’s actually pretty amazing that a property controlled by three competing media companies—Fox, ABC and NBC—could be this successful! Either way, Hulu ultimately faces headwinds because of conflicting objectives. Example: To the extent its content providers, including the aforementioned three networks and the CW (itself a joint venture between CBS and Time Warner), want to offer their shows to consumers on demand through cable providers, that would conflict with Hulu. And so when Hulu rolled out a new premium-pricing tier recently, you have to ask yourself if this was from a position of strength. Note that Hulu now has three levels of service, free with ads, tier one for $7.99 a month which allows you to watch anywhere, and the new add-free premium tier for $11.99, which, oh by the way, still does have some pre-roll or post roll ads.

AMAZON: The online retail giant recently announced it would allow its estimated 50 million Prime customers (who pay $99 a year for a grab bag of services including fast delivery, music, photo storage, as well as content) to download movies and shows, instead of limiting them to just streaming. (It’s a move that Netflix says it will never make, because downloading is just an interim step until we achieve wi-fi ubiquity. Of course, it also means that you are going to keep going back to Netflix to see what other shows and movies they have to offer.) But back to Amazon: The company actually had allowed downloading previously but only to its own Fire tablet. Now you can download to any mobile device (but not a desktop.) So is this a move from weakness or strength? Could be the former, which is unusual to say about this juggernaut. That’s because the whole notion of giving its hardware customers preferential treatment was getting a bit, how shall we say, moot, as Amazon’s hardware business has been here-to-date unimpressive. Some speculate the company may even get out of making electronics altogether. You have to ask yourself how big a priority the streaming content business is to Amazon, a huge company with myriad product lines. And remember, while Amazon may be somewhat “meh” about this business, HBO and Netflix are certainly not.

The real winners here are all of us. To compete for customers these companies and other traditional TV networks have been producing a mother lode of super creative programming that some are calling a new golden age of content. Now if I only had time to watch it all…

Advertisement