Why Disney+ may be the future of streaming: Analyst

Morningstar Analyst Neil Macker joins the On the Move panel to discuss the latest moves from streaming giants.

Video Transcript

JULIE HYMAN: Let's talk streaming wars now. Disney said this week its streaming channels collectively have now 100 million subscribers, about 60 of those with Disney+. And it compares with 190 million for Netflix globally. We've got a lot of other contenders, HBO Max, Peacock, Apple TV, all of them trying to draw in additional subscribers.

And meanwhile, we also heard from Roku this week. It warned that its pandemic bump in buyers might not last. We shall see.

To discuss all of that, let's bring in Neil Macker. He is an analyst at Morningstar who covers these companies. He's joining us from Chicago. So, Neil, let's get straight to it. Who do you think is best positioned when it comes to the streaming wars?

NEIL MACKER: Yeah. Obviously Netflix has an amazing head start on everybody. They've spent a ton of money on content over the last five or six years. And so they're obviously well positioned here. From a general subscriber and content [INAUDIBLE]. Generating cash flow, not so much.

Disney, on the other hand, has done a great job of just ramping up quickly here. I mean, if you think about when they launched last November to now getting 60 million subs on Disney+ alone, it's amazing. The fact that Hulu's at 30 million in the US alone. And they're gonna be launching a Star branded one internationally with a lot of the same content.

I think that they're in a really great position. You know, the other players like Peacock and HBO Max, we're seeing, you know, the intrinsic problems with licensing your content all over the place. And that peak-- HBO Max is about to lose the Harry Potter films to Peacock. And so how do you move that forward is the question that [INAUDIBLE] doing. But in our estimation, we think Disney's the best place moving forward.

ADAM SHAPIRO: Neil, I'm curious. What happens to Disney+, though, when all of us who got it for free, whether it was through Verizon or some other promotion, have to decide whether we're gonna shell out-- what is it, I don't know, $15? I mean, if you don't have kids, why are you gonna do it? Yes, I know "Star Wars" is there but seen it, been there, done that.

NEIL MACKER: Yeah. I think that one of the keys here is it's not $15. It's $7 a month and then the fact that it's $70 a year. So the value is there, I think, even if it is just Marvel, and Disney, and other plays like that.

I think the other key is one of the questions we have is, you know, a lot of these wireless companies do keep promotions on year to year. T-Mobile does have Netflix every year. Apple does, you know, Apple Music. So there's nothing to say that you won't be getting it free from Verizon next year either.

We do think that for a number of people, the value will still be there. And one of the keys, obviously, will be the ability to put new content on that platform over time. Obviously the pandemic, while it's helped accelerate users, has shut down production on some of the original content not only at Disney, but at Netflix as well.

JARED BLIKRE: Jared Blikre here. I wanted to ask you about some of the smaller offerings here. Not necessarily players, but I was just checking out the stock prices of a bunch of these different players over the last three months. And Viacom is up 58%.

NEIL MACKER: Yep.

JARED BLIKRE: I don't even know that they have more than one offering right now. But what about these smaller ones?

NEIL MACKER: Yeah. I mean, actually, Viacom CBS has been a huge success. Between Showtime All Access and CBS All Access, they already have over 16 million subscribers here in the US.

They're gonna start moving CBS All Access to a bigger platform, adding more Viacom stuff to it. And that's gonna take that internationally. So that's a player as well.

Interestingly, on the Viacom CBS side, they're also going with on the ad video On Demand, the free streaming side with Tubi, which is something they picked up. That's picked up a number of monthly active users. And so what we're seeing is a lot of different ways to reach consumers over the top or directly. And we're gonna see that, you know, depending on the market, an ad-supported free platform may work better than a pure premium platform like a Netflix or an HBO Max.

DAN HOWLEY: Neil, at what point do we get too many platforms, though? I mean, it's-- it's getting to the point where it's ridiculous. Are we gonna see consolidation?

NEIL MACKER: I think one of the problems is some of these larger companies, especially in the media space, it's really hard to see how they consolidate, right? Like, I don't see how you can put a Disney and NBC Universal together or something like that. On the smaller end with the AMCs, the Discoverys, Viacom CBS, you may see some consolidation there.

What you may see is-- is that, you know, we're seeing not everybody can watch everything. And we've already sort of seen that with peak TV over the last couple years. And you may just pick and choose.

And one of the things that we're looking for in terms of consumer behavior-- and we saw this a little bit with HBO-- is signing up for service for a month or two, watching as much as you want, getting off the service, jumping onto another service, and moving back and forth. Given that there's no physical hardware that you have to have, and it's simply your credit card and a click of a button, the ability to move through platforms for consumers is relatively easy. And we may see more behavior like that.

JULIE HYMAN: You mean, we do not just have unlimited time to watch all of the shows out there, Neil? Thanks so much for joining us with your perspective. Appreciate it. Neil Macker is an analyst at Morningstar.