If all goes as planned, by mid-2020 four of the most valuable companies on the S&P 500 will have introduced streaming services in less than a year. They are spending billions of dollars to fund hundreds of new movies and TV shows to compete with established players Netflix, Amazon and Hulu in what's become known as the Streaming Wars.
What are the new streaming services?
Walt Disney Co. the world's largest entertainment company, and Apple Inc., maker of the iPhone, kicked things off in November with Disney+ and Apple TV+. Two other services -- HBO Max from AT&T Inc., the telecommunications company that bought Warner Media, and Peacock from cable giant Comcast Corp. will debut in mid-2020.
YouTube has been streaming TV for 14 years, Netflix and Hulu for 12 years, while the traditional media companies, highly invested in cable, held back. The more people canceled their cable and satellite subscriptions -- and the higher Netflix's stock rose -- the harder it got for those companies to ignore the change in viewing habits. They're finally going all-in on internet TV because that's where they see the business going. In an October poll of U.S. consumers with broadband internet by Hub Entertainment Research, 63% said they watched their favorite show online.
Is there a market for so many services?
Most surveys suggest the average customer will pay for three to five streaming services. Netflix is well-entrenched with more than 160 million subscribers and is unlikely to hemorrhage customers. Disney+ is seen as a surefire hit. It got off to a strong start, reaching 10 million customers within a day of launching in North America.
Can the number of shows keep expanding?
Coining the phrase "peak TV," John Landgraf, the chief executive officer of FX Networks, argued in 2015 that the TV industry could not sustain its ever-increasing output. The cost of programming has ballooned as viewers have grown accustomed to original content that's movie-quality, and as services have competed for the rights to reruns of hit series. Yet U.S. producers are making at least 100 more shows per year now than they did when Landgraf made his prediction.
How can they afford it?
To some extent, providers are using streaming to sell other things, so there's not so much pressure for the services themselves to generate profit. Amazon, for instance, offers its video service free as an incentive for consumers to sign up for Amazon Prime, which has an annual fee and comes with free shipping, an inducement to order more stuff from the online retailer. Apple is using streaming as an enticement to get people to buy a new electronic device from among its products, and may soon bundle Apple TV+ with its paid news and music services.
What does this mean for cable operators?
More declines in subscriptions. The number of people canceling their pay-tv subscriptions in the U.S. hits a new high almost every quarter. AT&T alone lost more than 1 million customers in the third quarter of 2019. While Comcast and AT&T would like to hold onto as many TV customers as possible, they make a higher profit margin selling customers internet. And they can charge you extra for using up more data with every streaming binge.
Will cable TV die?
Sports is the only thing holding the cable business together in the U.S. Traditional TV networks still hold almost all the rights to broadcast major U.S. sporting events, and that's not likely to change any time soon. Most sports leagues are wary of giving away their most valuable asset to streaming services.
Are there still more streaming services to come?
Media companies create new streaming services every day. But most of them serve a particular niche. Viacom Inc., owner of MTV and Nickelodeon, sells one for black viewers (BET+) and another for little kids (Noggin). AMC Networks Inc. offers one for horror fans (Shudder) and another for devotees of U.K. shows (Acorn).