Netflix Stock Could Be Hurt by Apple’s Aggressive TV+ Pricing

Apple’s (NASDAQ: AAPL) much-anticipated original video subscription service, Apple TV+ ,will launch in more than 100 countries on Nov 1. The service will be available on the Apple TV app on iPhone, iPad, Apple TV and other platforms for $4.99 per month.

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Apple’s aggressive pricing strategy is set to heat up competition in the streaming market. Established players like Netflix (NASDAQ: NFLX), Amazon’s (NASDAQ:AMZN)  Prime, and YouTube, as well as new entrants like Disney (NYSE: DIS), Comcast’s (NASDAQ: CMCSA) NBC and HBO Max might find it extremely difficult to match Apple TV+’s rock-bottom pricing.

NFLX Under Threat Due to Price War

NFLX missed its subscriber addition target in its last reported quarter, primarily due to a price hike. In the United States, the company lost roughly 130,000 paid subscribers against management’s expectation of growth of 0.3 million.

At the end of the quarter, the streaming giant had 151.56 million paid subscribers globally, up 21.9% from the same quarter a year earlier. Meanwhile, NFLX had expected to wrap up the quarter with 153.86 million paid subscribers globally.

Netflix’s standard plan now costs $9 per month, with streaming on only one device. For $13 per month, users can get HD streaming and streams on two devices. For $16 every month, users can obtain 4K streaming and stream on four devices simultaneously. Per The Guardian, as cited by The Verge, the company has also raised prices in the U.K.

However, the price war that is set to intensify with the launch of Apple TV+ and Disney+ doesn’t bode well for Netflix stock. Notably, the company has underperformed both Apple and Disney in 2019.

While Netflix stock has  returned 8.6%, Disney, Comcast and Apple’s shares have rallied 23.5%, 36.4% and 37.3%, respectively.

Year-to-date Performance

Next quarter, DIS is set to launch  Disney+ for $6.99 per month and a Disney+, ESPN+ and Hulu bundle for $12.99 per month. The company is banking on its latest box-office hits like Avengers: Endgame to attract subscribers. DIS aims to add 12 million subscribers by the end of 2020.

Per a CNET article, Disney+ will offer users four simultaneous streams, including videos with 4K, UHD and HD picture quality and seven different user profiles, at no extra cost.

Further, Comcast’s NBC is set to bring an ad-supported streaming service online in 2020. It will be free for cable TV customers. For cord cutters, it is expected to cost $10 per month, still cheaper than Netflix’s offering.

Apple’s Strong Content Makes It a Potent Challenger

Apple’s robust original content portfolio  includes shows of different genres like See, The Morning Show, Dickinson, For All Mankind and The Elephant Queen is a key catalyst.

Although the company’s content portfolio is not as expansive as Netflix or  Disney+ (due to Disney’s  inclusion of 21st Century Fox content), Apple’s focus on partnering with Oscar-winning content makers as well as popular Hollywood stars is expected to be a game-changer.

AAPL has inked major content deals with the likes of Oprah Winfrey, Octavia Spencer, Steven Spielberg, Francis Lawrence, Damien Chazelle, M. Night Shyamalan and Kristen Wiig. Also,  See features Jason Momoa and Reese Witherspoon, while The Morning Show stars Jennifer Aniston. Furthermore, Apple’s feature film, The Banker, stars Anthony Mackie and Samuel L. Jackson.

These factors are expected to help Apple create a place for itself in the intensely competitive streaming market.

Zacks Rank

Apple, Netflix and Comcast currently have a Zacks Rank of #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Disney has a Zacks Rank of #5 (Strong Sell).

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