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Will a Crowded Streaming Space Challenge Netflix's Dominance?

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Comcast (CMCSA - Free Report) owned NBCUniversal is the latest entrant in this rapidly growing market that has already attracted big names like Apple (AAPL - Free Report) , Disney (DIS - Free Report) , Amazon (AMZN - Free Report) , WarnerMedia, Sinclair Broadcasting and others.

Notably, the streaming market is expected to witness CAGR of 19.1% from 2018 to 2025 and reach $124.57 billion by 2025, per Grand View Research. Moreover, average revenue per user (ARPU) is expected to be $91.37 in the United States in 2019 and is expected to reach $98.64 by 2023, per Statista.

The host of new services promises quality experience for customers at a cheaper cost, the major reason behind the proliferation of over-the-top (OTT) viewing in the last couple of years. It is expected that almost all traditional media companies will have an OTT solution in the long haul.

Will Netflix Face the Heat?

Netflix’s (NFLX - Free Report) portfolio strength supported by aggressive spending ($13 billion estimated in 2018) gives it a huge competitive advantage. Moreover, the company’s recent decision to hike subscription price reflects its confidence in its content despite intensifying competition.



Netflix’s focus on originals — both movies and TV shows — has been the key catalyst behind the company’s surging subscriber base (137 million at the end of third quarter 2018). The company’s decision to use big data analysis while developing its content lineup helped it big time.

The impressive content quality along with Netflix’s strategy change to give its original movies more theatrical exposure helped the company win awards and accolades in 2018.

Roma was announced the best movie of 2018 by the New York Film Critics Circle and won the Golden Lion Award. The movie also won the award for best foreign-language film at this year’s Golden Globes.

Netflix, Inc. Revenue (TTM)

Further, in the television category, Netflix’s The Kominsky Method won the Golden Globes for best comedy or musical. The streaming giant won five Golden Globes, beating all other studios.

Moreover, its user data collection practice and analysis has helped the company test a few unique features. Notably, Netflix is testing a replay feature, where a “watch that scene again” pop up is being incorporated and tested on popular movies like Mowgli and Dumplin.

The company recently forayed into interactive films with the release of Black Mirror: Bandersnatch. The move is expected to boost user engagement. Also, Netflix may use user participation data in marketing strategies to lure customers.

Netflix, which has a Zacks Rank #3 (Hold), is also diversifying its content portfolio. The company is working on projects across India, Mexico, Spain, Italy, Germany, Brazil, France, Turkey and the Middle East.

However, Netflix does not offer news and sports content and has no plans for the same in the near term, per management.

NBC’s Portfolio Strength, Sky to Aid its Reach

NBCUniversal is set to launch its streaming service in early 2020. Despite being a late entrant, with its free ad-supported service, the company is expected to hit the right audience of pay-TV subscribers. Notably, about 80% of viewers in the United States have cable or satellite subscriptions even in the streaming age, per NBC CEO Steve Burke.

This depicts the strength and leverage the company can get by promoting the service to pay-TV subscribers, even outside the Comcast and Sky ecosystem. Notably, NBCUniversal is looking to strike deals with other cable companies including Charter and DISH to promote its streaming service.

Comcast Corporation Revenue (TTM)

Moreover, NBCUniversal can bank on NBC’s popularity among its viewers. Notably, NBC was rated the most-watched TV network in 2018 due to its strong content portfolio including popular shows This Is Us and sports content including Super Bowl and Winter Olympics among others. Further, its viewer base increased 9% year over year to 7,876,000 at a time when more people were cutting the cord.

NBCUniversal’s decision to add live sports to its service might give it an edge, especially with the upcoming 2020 Olympics. Additionally, following the acquisition of Sky, NBCUniversal will have the flexibility to cross sell its content to customers in the United States and Europe, thereby boosting its content portfolio.

Moreover, the company may consider owning exclusive rights to The Office and DreamWorks Animation films, after Netflix’s term ends. Further, with Comcast and Sky’s tremendous reach, NBCUniversal may have the highest subscriber base among the newly launched services.

Burke noted that in spite of its plans to launch a streaming service, Comcast, currently carrying a Zacks Rank #3, will continue to hold its 30% state in Hulu, which recently added more U.S. subscribers than Netflix. Notably, other stakeowners in Hulu are Disney (30%), Fox (30%) and AT & T (10%).

Disney, Amazon & Apple Strong Contenders Too

Disney already has ESPN+ to showcase its sports content and will soon launch Disney+ in 2019, its standalone streaming service. However, a user who prefers to watch both on-demand and sports is forced to buy two subscription services. Currently, Disney carries a Zacks Rank #4 (Sell).

Amazon offers on-demand and sports content. Notably, Prime users can access 11 TNF games for 2019 season and Premier League soccer games in the UK starting 2019. Moreover, it recently launched a free video streaming channel called IMDb Freedive.

Amazon has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Apple has been on a spending spree to scoop up original TV and film content, featuring some of the biggest directors and actors in Hollywood, to support the launch of its streaming service as soon as March 2019.

Notably, the company planned to spend $1 billion on original programming in 2018 and is expected to spend $4.2 billion by 2022. Also, the company is continuously focusing on acquiring/partnering with Oscar winning content makers to create a place for itself. Apple currently has a Zacks Rank #3.

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