90 Million or Bust? Streaming TV's Great Subscriber Race Begins
90 Million or Bust? Streaming TV's
Great Subscriber Race Begins
As Disney, Apple, AT&T and Comcast bet big on direct-to-consumer services, lofty membership goals are met with analyst concerns over marketplace crowding.
When Disney+ launches
Nov. 12, the new streaming service will begin what Disney CEO Bob Iger hopes is
a quick journey to at least 60 million subscribers by the end of 2024. Six
months later, on a still-to-be-announced date in May, HBO Max will take off on
its own sprint to hit at least 75 million subscribers in 2025.
Instead of the
"streaming wars," it's more like a streaming race as each new entrant
that launches strives to reach ambitious subscriber goals and carve out a piece
of the overall direct-to-consumer video market. With U.S. pay TV subscribers
expected to drop from north of 100 million in 2014 to 78 million by 2022, per
research from Sanford C. Bernstein, every company has recognized an opportunity
to lure those cable defectors (and recruit digital natives) to their services.
But with four new offerings — Apple TV+, Disney+, HBO Max and Peacock —
flooding the market over the next year, it's anyone's guess how customers will
respond to the glut of choices, especially as the cost of several subscriptions
mounts.
"It is not a
zero-sum game," contends Wedbush Securities analyst Michael Pachter.
"People can subscribe to multiple streaming services." Still, the
number of adults ages 30 to 44 paying for more than five streaming services
currently sits at a low 4 percent, per a Hollywood Reporter/Morning Consult poll conducted Oct. 24 to 28, and
a July survey of more than 2,000 adults found that a $21 bill across three
services is the optimal price point to woo many subscribers. Given that
subscribing to the four new services plus Netflix and Hulu will cost upward of
$45 a month (not including the cost of internet access), every company will
need to get creative to turn these multibillion-dollar bets into profitable
ventures.
Though Disney is
starting from zero to build up its Disney+ subscriber base, Carmel Group
analyst Jimmy Schaeffler calls it the "1,000-pound gorilla in every
room" thanks to the strength of its brand, which will be on display
through its library and programming like Star Wars-adjacent The Mandalorian.
Still, without the
advantage of a preexisting large-scale direct-to-consumer relationship with its
fans, Disney also is looking to other subscriber acquisition tactics as it
seeks to hit between 60 million and 90 million members (and reach
profitability) in the next five years, offering discounts in exchange for three-year
commitments and putting the pieces in place to bundle the service with ESPN+
and Hulu, which already have 2 million and 28 million subscribers,
respectively. It also has struck a deal with Verizon to offer Disney+ free for
a year to unlimited wireless customers, exposing it to as many as 18 million
potential new members.
Where Disney+ could
struggle would be in enticing adults without children who aren't swayed by a
lineup heavy with genre fare from Marvel and Lucasfilm. But direct-to-consumer
and international chairman Kevin Mayer shrugged off those concerns in an
October interview with THR, noting that
testing in the Netherlands — where Marvel's Agents of SHIELD and The Suite Life of Zack & Cody have been
top-streamed series — "shows that the diversity of appeal that we've hoped
for is starting to take shape."
Brand also is at the
forefront of WarnerMedia's plans to market HBO Max, which will offer 10,000
hours of programming, including the full HBO lineup, Friends, films like The Lord of the Rings and originals such as a Gossip Girl reboot. As executives ramp up
their efforts to reach $1 billion in profits and between 75 million and 90
million subscribers globally by 2025 (including 50 million in the U.S.), the
$15-a-month service also has the advantage of being the same price as HBO. The
10 million people who currently subscribe to HBO via WarnerMedia parent
AT&T will be grandfathered into HBO Max, and the company is in talks with
pay TV providers about offering a premium to woo HBO's remaining 24 million
subscribers.
"I look at it as
a degree of an IQ test," WarnerMedia CEO John Stankey told investors Oct.
29, questioning the logic of a subscriber who wouldn't opt into twice the
content as HBO "for the same price." But LightShed Partners analyst
Rich Greenfield notes, "HBO as we have known it will not exist going
forward," as the result of the HBO Max launch, which could risk diluting
the brand.
Apple and NBCUniversal
have yet to publicly set subscriber goals for their offerings, though each
company expects to have built-in a membership base. For Apple, its TV+ is a
perk designed to entice people to buy new devices. With a user base of 1.4
billion — and 900 million iPhones on the market — the $5-a-month service has
the potential to gain traction among existing Apple customers.
But, says Schaeffler,
"people don't know Apple TV+ for its content," so to entice them to
give the service a try, the tech giant is offering a year free to customers who
upgrade qualifying Apple devices. It's a move that Barclays analyst Tim Long
estimates could translate into "well over 100 million subscribers a year
from now." Apple TV+ also is looking to become a hub for access to other
streamers, a strategy Amazon has pursued.
NBCU, meanwhile, is
expected to offer an ad-supported version of Peacock to 55 million Comcast
cable and Sky customers, who could immediately have free access to the
service's 15,000-plus hours of programming, including The Office and new shows from Sam Esmail and Mike
Schur.
But none of these
services will build membership bases in isolation, and they must contend with a
market dominated by Netflix, which has 158 million global subscribers, as well
as Amazon Prime and Hulu. Digital TV Research forecasts that in the next five
years, the number of gross video subs worldwide will increase to 970 million.
Each new entrant will now fight for a piece of that pie.
As Stankey noted from
the stage of WarnerMedia's HBO Max reveal: "In the era of Amazon, Apple,
Google and Netflix, scale is no longer defined by distribution to one-fourth of
U.S. consumers. It's a global game."
This story appeared in the Nov.
6 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
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