Streaming Wars: Winners & Losers - Needham & Co.

Key Streaming Valuation Conclusions1 Streaming and OTT Viewing Up Strongly During ShelterinPlace COVID19 has accelerated the trend away from traditional pay TV we believe Also quotCOVID19 lockdowns hurried along the inevitable transition away from the studio system This was already happening but in much slower motionquot according to Josh Oreck CEO of Narrator Inc2 Production Halt Benefits Streaming Cos Because many streaming services drop entire new seasons on the same date they had more hours of nearly completed episodes in the pipeline giving them a deep bench of hundreds of hours of new unreleased content This was a strong comparative advantage vs broadcasters and cable networks that stopped new production in midseason or new films that stopped filming halfway through completion3 No Live Sports Benefits Streaming Cos With consumers forced to shelterathome rising layoffs and no pro sports on TV consumers turned off their traditional linear TV bundle and signed up for 24 new SVOD monthly fee streaming services according to our research This is in addition to new users of AVOD free addriven streaming content which doubled in 2Q20 we believe4 Dark Movie Theaters Benefit Streaming Cos Widespread theater shutdowns starting in March led film studios to cancel theatrical releases for highbudget films such as Artemis Fowl Trolls World Tour etc and release these films directly to streaming services Additionally COVID19 is driving more experimentation such as a Universal signing a multiyear 17day theatrical window deal with AMC while no one else in the movie business has ever achieved less than a 75 to 90day exclusive theatrical window and b Disney releasing Mulan its 200mm live action remake for 30 on Sept 4th to its Disney streaming customers only5 Affordability Benefits Streaming Cos The low cost of streaming services especially during free trial months was their key attraction during COVID19 for many consumers we believe It39s a free entertainment option at least at first Owing to churn and fraud Disney has stopped offering free trials and we believe this represents best practice for value capture Roku39s July 2020 study found that 40 of cordcutters said free or extended trials for streaming services encouraged them to cut the traditional TV cord6 Unemployment Benefits AVOD With one in five American workers receiving unemployment benefits according to the New York Times in late July 2020 consumers have more time to watch streaming service content The economic impact of widespread unemployment might negatively affect SVOD streaming services if people will have less disposable income according to Josh Oreck or cause them to rotate sequentially among SVOD services rather than pay for multiple SVOD subscriptions simultaneously7 Disney Timing and Launch Perfect Execution Disney was launched in the US in Nov 2019 and by March 2020 consumers globally were locked down at home Flawless global execution and some lucky timing have allowed Disney to add as many new streaming subscribers in 8 months as Netflix did in its first 8 years Disney has been both a driver of upside streaming success and a beneficiary of the unique historical context created by COVID198 Streaming Sub Adds Spiked in May and stabilized in June and July for NFLX the streaming industry leader We expect this to fall after live sports resume and shelterathome orders are relaxedLink to Full Report with DisclaimersClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Streaming Wars: Winners & Losers - Needham & Co.

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Laura Martin

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