Streaming wars: Disney’s march gathers pace 

The shift to streaming video has dramatically changed how the media industry works and how content is consumed.  Some of us remember when we had to sit down in front of the TV at the right time, set the record button or scour through our DVD library to watch our favourite show.  Today, we can watch what we want when and where we like.  According to Nielsen, streaming video on demand (SVOD) is now the most popular form of viewership. Media companies have been forced to pivot to avoid falling by the wayside: Peacock, Paramount+, Disney+, Apple TV+, and HBO Max have all launched in the past three years to catch up with the demand.

Streaming climbed to a new level during the pandemic as strict restrictions forced people to stay at home.  Not only was this a catalyst for demand, but film and television production was put on hold too, and with little, if any new content like reality TV shows being released, viewers switched to streaming.  

Share prices of streaming companies soared during the pandemic but this year investor sentiment has changed significantly.  With the reopening of economies, consumer have other options to spend their time and money so comparisons are difficult.  The cost of living crisis is forcing people to adjust to higher inflation and increasing mortgage costs and increased churn is a concern.  The pioneer, Netflix, admitting to losing subscribers at the start of 2022.  Streaming platforms bore the brunt of the negative sentiment as expectations were recalibrated and multiples declined.

Light at the end of the tunnel

However, we believe that as we move towards the end of the year that there is light at the end of the tunnel and that investor sentiment towards streaming platforms can improve. 

First, there is evidence over the past six months that people have been cutting back on buying food at restaurants or takeout and shopping for clothes rather than closing their TV or film streaming accounts.

Streaming has become an essential part of daily life and represents good value for money compared to other things. Given that the average time spent watching Netflix is almost an hour and a half a day, and costs around $15 a month, it is very cheap entertainment per minute consumed.

Second, both Netflix and Disney+ are about to launch advertising-based, video-on-demand (AVOD) packages that can help reduce churn and bring in a new revenue stream.  These tiers will be priced cheaper and so users can trade down to them if they are budget conscious.  

The global advertising market has grown significantly over the past two decades, spurred by the growth of digital advertising and overall GDP growth.  However, linear TV advertising has given up market share spend to digital formats, and we think that there is a large opportunity for digital video advertising to take share from linear TV given its high levels of engagement.

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