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Apple's Aggressive TV+ Pricing Heats Up Streaming Competition

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Apple’s (AAPL - Free Report) 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 a month.

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

Netflix’s Lead Under Threat Due to Price War

Netflix missed its subscriber addition target in the 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 said quarter, the streaming giant had 151.56 million paid subscribers globally, up 21.9% from the year-ago quarter. Meanwhile, Netflix had expected to wrap up the quarter with 153.86 million paid subscribers, globally.

Netflix’s standard plan now costs $9 a month, with only one available stream. For $13 per month, users can get HD streaming and two simultaneous streams. For $16 every month, users can avail 4K streaming and four simultaneous streams. 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 investors. Notably, the company has underperformed both Apple and Disney on a year-to-date basis.

While Netflix’s shares have returned 7.6%, Disney, Comcast and Apple’s shares have rallied 23.8%, 36.4% and 37.3%, respectively.

Year-to-date Performance


 

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

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 in 2020, which will be free for cable/linear TV customers. For cord cutters, it is expected to cost $10 a month, still cheaper than Netflix’s offering.

Apple’s Strong Content Makes It a Potent Challenger

Apple’s robust original content portfolio that 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 upcoming Disney+ (due to the 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.

The company 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, its shows like See and The Morning Show feature the likes of Jason Momoa and Reese Witherspoon & Jennifer Aniston, respectively. Furthermore, feature film The Banker stars Anthony Mackie and Samuel L. Jackson.

The aforesaid factors are expected to help Apple create a place for itself in the intensely competitive streaming market. Per ResearchAndMarkets.com, it will witness a CAGR of 19.1% between 2019 and 2025.

Zacks Rank

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

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

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