A warning to Disney (NYSE:DIS) and everyone else lining up a great new streaming service: You’re not all going to get through that door.
Disney already has a big chunk of the streaming market thanks to Hulu, which it says is worth $27.5 billion. Next month’s launch of Disney+ will also add to that market share. Disney is bundling both services — and adding in ESPN+ — for $13 per month, the same price as Netflix (NASDAQ:NFLX).
CBS (NYSE:CBS) also has a streaming service called All-Access, at $6 per month. AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) are both offering “streaming” services at cable-like prices. Apple’s (NASDAQ:AAPL) Apple TV+ launches in November at $5 per month.
But there’s a big problem.
The Nature of Streaming
Streaming is different from cable. Cable offers a rotating collection of shows, 50-100 at one time, from which users can choose. Streaming offers 24-hour access to a full library of shows.
Cable choices are limited and cost roughly $150 per month to access. Streaming choices are unlimited and cost one-tenth of that.
This means that, despite the best efforts of AT&T and Comcast to gouge their broadband customers, it’s unlikely they’ll be spending as much on streaming as in their current models.
And how many streaming services do you really need? I get Amazon’s (NASDAQ:AMZN) Amazon Prime at $10 per month plus free shipping, and I can’t keep up with it. In addition to its new shows Amazon offers a vast library of old stuff. Its IMDb TV service also offers many of the movies I’d see on Turner Classic Movies, on which Comcast recently added a $10 per month charge by bumping the channel into a higher tier. Oh, and did I mention Amazon Prime comes with free shipping?
Beyond that, I can’t see a need for anything other than live sports. Everything else is available for free on the Internet. Many millennials bypass streaming altogether for free YouTube videos from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Or, they play video games and go to bars to watch sports.
Everything competes for time. No matter how much there is to watch, no matter how much money there is in your pocket, there are only so many hours in the day.
Driving Engagement
Disney insists that people will pay its price — which all its investors believe will be steadily rising — for access to its old library. And some will. Kids love Disney.
But I remember being told by a newspaper publisher 25 years ago he’d make a bundle on this new Internet thing by simply repurposing existing content on new sites.
The problem is something I call Moore’s Law of Content. Unlike software, which provides value each time it runs, content’s utility fades with use. I don’t need to read a book 10 times. There are few movies I’ll watch over and over. A lot of that cable and syndication viewing of old shows is based on the fact that old shows are the only things on.
With streaming, there’s always something to watch you haven’t seen before.
Netflix knows this. Its software can drive you down any content rabbit hole you want. Not only does it know what you’ve seen, it knows what you want to see next. It’s exhilarating, but also exhausting. How many such services like this do you need?
Not as many as the industry thinks.
The Bottom Line on Disney Stock
Hulu already has 26.8 million paid subscribers. Disney+ is expected to have 82 million in five years.
That sounds great, but by that time Disney must replace a media networks business that brought in $6.2 billion during the June quarter. Netflix, with 158 million members, had revenue of $5.2 billion during its most recent quarter.
The numbers don’t add up. Add in competition from CBS, Comcast, AT&T, Apple, Amazon, Google, gaming and whatever comes next. There just aren’t enough hours in the day for everyone to survive the coming streaming shakeout.
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and AAPL.
