"Streaming Wars" Mid-Year Report: How the Top 5 Stack Up (& Are Trending for the Rest of 2021)

We now have Q1 earnings under our belts in the world of media and tech. So now it’s a good time to digest what we’ve learned in the fascinating streaming wars amongst giants that dominate Hollywood. Just 18 months ago, reigning champ Netflix played relatively alone). But that was then, this is now. Now four global giants (plus several more) place Netflix directly in their crosshairs as streaming has become core to their long-term strategies. So let’s handicap all these mega-players and identify how they’re trending for the rest of 2021.

I. NETFLIX – Bearish

First the good news. Netflix remains the undisputed global leader in the world of premium video streaming – to the tune of 207+ million paying subscribers. Now the bad news. The red giant’s growth stalled significantly in Q1. Where the Street expected about 6 million new subs, Netflix delivered less than 4. Netflix Bulls, like pundits Scott Galloway and Kara Swisher, dismiss any concerns about this “miss” as being much ado about nothing. Essentially, so the story goes, Netflix simply pulled forward its 2021 subscriber additions into 2020 due to the pandemic and our collective lockdown. So, it is natural that 2020’s boon leads to early 2021 bust. Makes sense.

But not so fast. Netflix Bears (yes, there are some) have long flagged the fact that its U.S. market is saturated and its existential dependence on continued international hypergrowth faces its own significant hurdles – including very different economics in mobile-first territories (of which there are many) and localized competition. And that’s the operative term. “Competition.” Netflix now battles not only Amazon for global dominance, but it also faces global challenges from Disney, Apple and HBO Max (and those are just the major U.S. players). As powerful as Netflix’s brand is, Disney’s and Apple’s are two of the most powerful brands on the planet. But there’s more. Disney and HBO Max both boast content franchises Netflix cannot match (not even close). So Netflix must fuel its global ambitions (and satisfy the global audience’s insatiable appetite for more, more, more) by churning out an endless stream of expensively produced content. The cost? $17 billion this year alone.

And Netflix’s only source of financing for its content mega-budgets (apart from its near $15 billion debt load) are our monthly subscriptions. That is Netflix’s sole revenue stream. Meanwhile Amazon monetizes our shopping, Apple monetizes its hardware, HBO Max monetizes its AT&T wireless plans, and Disney monetizes its global theme park and merchandising. In other words, Netflix is all about the content. For the other four, the content is all about the marketing of a much bigger overall machine.

Netflix certainly isn’t going anywhere anytime soon (we all love it after all). But for the first time, Wall Street Bears are coming out of the woods. Netflix must diversify its business – like all of its massive competitors - or face ultimately being swallowed up by one of them. The next few quarters will be telling. Note to self. Netflix only expects to add 1 million new subs worldwide in Q2. Sure they are sandbagging after Q1 results. Nonetheless, the number will be much lower than what we would normally expect.

II. AMAZON PRIME VIDEO – Bullish

The Bulls are out in full force behind Amazon Prime Video, and it’s not just because everything Jeff Bezos touches turns to gold. It’s hard not to feel confident about a service that plays by entirely different rules of the game and, therefore, feels no pressure to succeed on its own. Whereas Netflix must make money from its streaming service to survive, Amazon Prime Video can justify its existence by functioning as marketing to draw us in, shop more, and feel better about Jeff Bezos seemingly touching every aspect of our daily lives.

Amazon Prime Video is massively global already. It comes “free” of charge with near $120 annual Amazon Prime memberships, a number that has now crossed the 200 million mark. And here’s the thing. Amazon now openly taunts Netflix. Bezos has significantly dialed up Prime Video’s content heat by approaching Netflix’s gargantuan content spends. Amazon spent $11 billion on content in 2020, just behind Netflix’s $11.8 billion last year. Bezos upped his ante so that Netflix co-CEO Reed Hastings must do the same. Who is in a better position to play that game?

III. DISNEY PLUS – Bullish

In less than 18 short months, Disney has done what few thought was possible – crossed the 100 million paid subscriber count. Disney Plus now boasts about half of Netflix’s total subscriber count. And in the next 18 months (let’s say 36 months to be safe), expect Disney to surpass Netflix worldwide. After all, Disney packs a 1-2 punch that neither Netflix nor Amazon can match.

First, Disney is a global brand that is practically ingrained in our biological DNA. We were all born with mouse ears, and we happily pass those on to our own kids. Second, Disney boasts global franchises and a content library that are the envy of all others. Just think of the Mouse House’s holy content triumvirate – Marvel, “Star Wars,” Pixar. And oh yes, the Disney Princesses. And oh yes, Disney bought Fox’s entertainment assets a while back, so add “The Avengers” and “Avatar” to that list. That’s a lot of evergreen content that we and our kids will watch over and over again – and that Disney can continuously mine for future subscription gold.

Most still don’t understand that this is just Disney Plus’s beginning. In a galaxy not so far far away, we will see Disney Plus for what it really is – the door to Disney’s entire Magic Kingdom where different tiered subscribers will receive different tiered benefits (streaming video, yes, but also monthly theme park offers, kid indoctrinating plush toys, etc.). Disney Plus marks a fundamental transformation of Disney’s business model. It ditches Walt’s transactional approach for Galloway’s Prof G “rundle” – recurring revenue bundles that Wall Street loves. Guess where now-departed CEO Bob Iger got that idea? From Bezos, of course, who transformed his company by practically inventing the ultimate rundle - Amazon Prime.

And let’s not forget that longtime Netflix annoyance Hulu is part of the Disney family and plays a central role in its streaming story. Under the “Star” banner, Hulu is now central to Disney’s plan for global streaming domination. Oh yes, theme parks are re-opening as we speak, giving Mickey even more opportunities to bombard us with streaming messages, live and in person, to drive us back online.

IV. APPLE TV PLUS – Neutral

I know, I know. Apple TV Plus is not terribly exciting. There continues to be a relative dearth of compelling original programming compared to the other giants. But don’t kick this giant too much, because Captain Tim Cook most certainly is in it for the long run. Imitation is most definitely the highest form of flattery in these streaming wars, and Cupertino – just like Disney in Burbank – tore a page from Amazon’s rundle playbook and placed Apple TV Plus as a premium feature in its Apple One services rundle that, just like Disney Plus, is still in its early innings.

Apple tops a $2 trillion valuation now, but it’s not because of skyrocketing revenues and earnings. In fact, overall revenue growth has been relatively anemic by Apple standards over the past few years. But it’s the quality of those revenues and earnings, not the quantity. Apple’s recurring services revenues take increasing share, and investors love that.

Apple TV Plus plays the same marketing and “brand love” relationship role for Apple that Amazon Prime Video plays for Amazon – the content is used as marketing to draw us in and keep us there. Content is “friendly” and warm. Hardware – even Apple’s cool – is much colder. So Apple plays with our emotions, and will invest significantly more over time into its own original programming (hence the just-announced major expansion of its LA studios over the next few years). Apple will also leverage its already massive international presence to challenge Netflix and others at every pass.

Expect Apple TV Plus to grow on us. Slowly. Steadily. Under the radar. Until it isn’t.

V. HBO MAX - Bullish

Slow out of the gates – and seemingly lost amidst the purple haze it created with its clunky “HBO Max” name (which many pundits believed cheapened HBO’s premium brand) – AT&T’s HBO Max is picking up steam and approaching 50 million paid subscribers. This one year old streaming toddler is getting its legs. Its magic trick to get its mojo back? Using the pandemic to do what (and other studios) wanted to do for a long, long time - release new feature films for in-home streaming on day 1, breaking decades-old theatrical windows in the process.

Yes, many in Hollywood jeered at new studio boss Jason Kilar’s decision to do what many considered to be blasphemous. But investors cheered this strategic mega-move that tech-transformed consumer behavior had made inevitable. HBO Max ripped off that band-aid, took the hurt, and did it (although it is retreating somewhat in 2022). And that new day 1 star power – in the form of “Wonder Woman 1984,” “Godzilla vs. Kong” and the entire premium Class of 2021 – catapulted HBO Max back into the conversation as being a real long-term contender.

A whole new international world awaits HBO Max, which is chock full of global franchises second only to Disney on this list. It’s a big global market out there, and HBO Max hasn’t even left the States yet. That changes this year, as HBO Max plans to roll out across 60 new territories.

The epic premium streaming battle is on. Knives are out. And the Fearsome Foursome wants to inflict 1,000 cuts on the reigning champ.

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