TBI Tech & Analysis: Streaming through the crisis

The World According To Jeff Goldblum

Streamers are facing unprecedented demand as locked-down households look for entertainment – to the extent that bandwidth is being rationed and the launch of Disney+ in France has been delayed. TBI speaks to Maria Rua Aguete, exec director at analyst giant Omdia, who breaks down who’s doing what and what it might mean longer term.

Netflix
The world’s biggest streamer has become a mainstay for viewers as Covid-19 has forced potential viewers indoors, something content chief Ted Sarandos admitted over the weekend.

But it also faces considerable challenges: its pipeline in the short-term might be flowing but productions have been paused and for a company whose third-party acquisitions have declined considerably over recent months, that’s a problem.

“Since they rely more than ever on these originals, it may impact subscriber growth towards end of the year and next year,” Aguete tells TBI.

“In the short-term, increased demand is expected, based on higher usage at home. That translates to paid subs immediately in most countries, since the free trial tends not to exist anymore.” And just in case you’d forgotten, the extent of that reach is already enormous: its Q1 subscriber numbers stood at 173.6 million, up from 148.9 at the same time in 2019. In the US, where growth has plataud, those numbers stand at 61.6 million and 60.2 million respectively.

Hulu

The Disney-owned streamer agreed a deal with Comcast last year to take full control of Hulu, but that doesn’t formally kick in until 2024. Nevertheless, the Mouse House largely has a free hand with full operational control of the Handmaid’s Tale streamer, meaning the 33% stake held by Comcast’s NBCUniversal (NBCU) is effectively a silent partner.

For viewers, that arrangement also delivers NBCU content and the Hulu Live carriage agreement for NBCU channels. It also provides an opportunity in the current environment, as Aguete points out, with growing cord-cutting “providing increased uptake for Hulu live TV and Hulu regular.”

Disney’s ownership might also be detrimental, though, as Mouse House performance in other areas – theme parks closing and movies not reaching cinemas, for example – resulting in a “limit in the development of the platform.”

The lack of sport is also posing considerable questions around the US triumverate of Disney+, ESPN+ and Hulu. Aguete says this may impact uptake and result in a reduced Average Revenue Per User (ARPU), as “bundled users are normally less likely to churn, but each aspect has its own issues with the virus.”

On the upside, Hulu with ads is $5.99, “so it’s very affordable, with lots of content and is likely to be one of the first subs people would be willing to add.” Numbers-wise, Hulu+ bundle had 27.7 million in Q1 of this year, compared with 23.2 million a year earlier.

Amazon Prime Video

The world’s biggest retailer, like its rivals in the streaming world, cut the bandwidth of its video service in Europe over the weekend as the continent battles to stay online amidst the pandemic.

“We support the need for careful management of telecom services to ensure they can handle the increased internet demand, with so many people now at home full-time due to Covid-19,” Amazon said.

The virus looks likely to provide a “potentially increased user base,” says Aguete, “as e-commerce uptake increases and consumers add Prime bundle subscriptions.”

There will also be more transaction VOD (TVOD) customers but co-productions may suffer, based on levels of withdrawal from local operators and content creators. “There’s likely to be increased viewership on [gaming site] Twitch as consumers stay home and as a potential knock-on effect from any developments/increased uptake within the games industry.”

On the subs front, there were 38 million Prime subscribers in the US in Q1, up from 33.3 million in Q1 2019. Worldwide figures stand at 76.7 million in Q1, up from 62.3 million in 2019.

Disney+

In some ways, the Mouse House has been most adversely affected by Covid-19. “Its India launch has been indefinitely delayed due to delay in the Indian Premier League cricket tournament, which they were due to launch alongside,” Aguete says.

The service had been due to be merged with Hotstar, which is already the number one paid service in India, the analyst adds, but she believes Disney hasn’t lost presence in the market – only potential new subs from the fresh Disney+ content.

The roll-out of Disney+ has also been delayed across France following a request from the country’s government concerned about the increasing strain on broadband services, but it is still set to come online in Ireland, the UK, France, Germany, Italy and Spain on 24 March. French customers will have to wait until 7 April.

“Pre-orders for Disney+ in Europe may go up,” Aguete believes, “as it offers better value and is useful if anticipating (or already experiencing) lockdown.”

However, there are questions around the delayed production of new Disney+ content, a key selling point for the new service, but the fact that even at full price it costs just £5.99/€6.99 per month or £59.99/€69.99 for an annual subscription means it will likely be one of the first new subs added.

“Disney would have originally expected increased churn for Mandalorian users in Q1 but now they may stay into Q1-Q2 depending on the virus duration,” Aguete adds, pointing out that the Mouse House has also brought forward the availability of kids movie Frozen 2 on the service.