In the past year, the video streaming services market has expanded and become more competitive, and stocks have jumped. However, the “real” fight begins this year as the COVID-19 pandemic dies down and companies fight for every subscriber. Who will win and which streaming company’s stock looks like a better investment today?
Over the past year and a half, new streaming services Peacock NBCUniversal from Comcast (CMCSA), ViacomCBS, WarnerMedia from AT&T (T) have entered the market, and newcomer Disney + (DIS) has grown strongly.
According to research firm Conviva, Americans spent 44% more time watching streaming video in the fourth quarter of 2020 than a year earlier.
However, with the expansion of mass vaccinations against COVID-19 and the abolition of quarantine measures, the indicators of these companies may return to “pre-pandemic”. In order to attract investors, companies must prove that they can increase their audience and profits in conditions when one has to “fight” for the viewer’s attention.
Market analysts began to lower their estimates of target prices for shares of streaming companies and forecasts for adding new subscribers.
To understand which choice to make, it’s worth looking at total subscribers and average revenue per user, or ARPU.
Objectively, those companies are in better position for which these indicators are higher (below are data based on the most recent quarterly income statement of each company). However, not all companies disclose these numbers – if the company chooses to hide them, there is probably a reason. Wall Street analysts often do not make predictions for such a service.
9 largest streaming companies listed on exchanges
208 million paying subscribers
74.4 million subscribers in the US and Canada
Average revenue per user (ARPU) for the US and Canada: $ 14.25
The global leader and the world’s best-known streaming video brand, Netflix (NFLX) is the best example of transparency in reporting in the industry.
The company quarterly discloses the numbers of adding the number of new users in each of its regions.
Netflix’s share value is up 64% in 2020, but the stock has been volatile since early 2021 and is now trading 1.25% lower than at the start of the year.
Disney + service audience (including Hotstar): 103.6 million subscribers, global ARPU $ 3.99.
Hulu alone: 37.8 million subscribers, ARPU $ 12.08
Hulu + Live TV co-service subscribers: 3.8 million, ARPU $ 81.83.
ESPN + sports streaming video: 13.8 million subscribers, ARPU $ 4.55.
The demand for Disney + during the pandemic and the rapid growth of its audience surpassed all market forecasts and even surprised the management of the company itself. Investors should keep a close watch on the performance of this newcomer to the market, however, as Disney’s reports do not reveal “the full picture of growth.
Disney does not separately publish the number of Disney + subscribers, combining that figure with the much cheaper and faster growing Indian streaming service Hotsta, and does not provide data by region, making it difficult to predict the service.
Disney also did not specify how many of its streaming customers have a free trial, which is being offered to some Verizon (VZ) customers under Disney’s contract with the telecommunications company.
Disney shares are up 20% in 2020, but the price has dropped 2% since the beginning of 2021.
3. HBO and HBO Max from WarnerMedia
WarnerMedia’s HBO and HBO Max audience has 63.9 million worldwide subscribers, of which 44.2 million are in the United States.
Average revenue per user (ARPU): $ 11.72 per month
With these HBO numbers, not everything is as simple as it might seem at first glance. AT&T did not specify how much of the $ 63.9 million they pay exclusively for the service, but how much they get included in AT&T’s mobile subscription package.
Investors are also not aware of the activity indicators of HBO and HBO Max use. AT&T announced in May that it would spin off its WarnerMedia business into a separate, new, stand-alone company through the Discovery Company (DISCA) merger. The deal is expected to close in mid-2022.
4. Amazon Prime Video
More than 200 million Prime subscribers worldwide, of which 175 million regularly watched shows and movies on Prime Video last year.
Basic subscription price: $ 12.99 per month, $ 119 per year.
Amazon (AMZN) does not disclose ARPU numbers exclusively on Prime Video, and it is difficult for investors to gauge the success of this particular internet giant’s service. A Prime subscription also includes free and fast shipping for Amazon online orders, discounts on Whole Foods, a Prime Music subscription, and more.
At the same time, the lack of disclosure about Prime Video is not as negative as it might be for other streaming services.
5. Peacock from NBCUniversal Comcast
Comcast-owned NBCUniversal Media (CMCSA) unveiled its video streaming service Peacock a year ago, but investors don’t know how many of Peacock’s 42 million people pay for the service because some versions of it are free.
Average revenue per user (ARPU) is also unknown. The Wall Street Journal reported last week that fewer than 10 million people are paying for Peacock – either for $ 4.99 with ads or $ 9.99 without ads.
In January 2020, NBCUniversal said it was targeting an ARPU of $ 6 to $ 7 per month.
Comcast shares are up 49% over the past year.
36 million subscribers worldwide, including the audience of the Paramount + service (launch date – March 4, 2021), Showtime, Noggin, BET + and others.
50 million global Pluto TV users on average per month
Media conglomerate ViacomCBS (VIAC) does not report specific numbers on Paramount + subscribers, preferring to bundle them with its other streaming services.
The lack of data on average revenue per user for Paramount + or Pluto TV also makes it difficult to evaluate these streaming services.
However, CEO Bob Bakish said Pluto TV’s ad revenue will surpass $ 1 billion in 2022.
The geographic distribution of ViacomCBS’s audience is also unknown, although Chief Financial Officer Navin Chopra said the “large majority” of new streaming subscribers were US-based Paramount + customers.
7. Starz by Lionsgate
29.5 million subscribers worldwide,
ARPU: about $ 6 per month
Starz is owned by Lionsgate (LGF) and is often viewed as more of a niche player than other international streaming services. However, a company’s transparency about the performance of its streaming service may indicate its confidence in its future prospects or its plans to find a buyer.
15 million subscribers to all streaming products,
Discovery + 13 million subscribers
Total ARPU: about $ 7 per month. ARPU for Discovery + with ads: over $ 10 per month.
In its report, Discovery Company (DISCA) did not disclose how many of these users are not paying for the service as part of a one-year trial subscription with Verizon.
Discovery will gain a better chance of competition following the close of its merger with WarnerMedia, which requires regulatory approval. Investors should wait for this moment before placing a bet on this player.
Discovery shares have surged strongly since the start of the year, but have plunged 25.2% in the last quarter.
In terms of the video streaming business, Apple (AAPL) is hardly a leader yet, as its management has said almost nothing about Apple TV + since the service launched in November 2019.
To attract audiences, Apple offered Apple TV + subscriptions for free for a year and then renewed those free trials. But many of these trials are running out of time, and users will need to decide if they want to spend $ 4.99 a month on the service.
Probably, the problems of the service are in the stop of filmmaking in 2020, while the Apple TV + content library is small and the lack of significant regular income from users, which is holding back Apple’s management from disclosing indicators.
The conclusion for investors is that the service is still too young and it is too early to make predictions, besides, the subscription price of $ 4.99 seems to many to be unreasonable. It’s not clear how much value this service can add to Apple’s huge business.