Streaming wars heat up

09/13/19
  • Apple announced launch of discounted streaming platform on Tuesday
  • Move seen as direct challenge to NFLX and DIS
  • Story far from over: Content may determine longer-term narrative

Forget the latest iPhone, the biggest news out of Apple’s (AAPL) Keynote extravaganza on Tuesday seemed to be its $4.99/month Apple TV Plus—seen by many as a shot across the bows of both Netflix (NFXL) and Disney (DIS), which have already been duking it out in the streaming entertainment space.

In addition to undercutting the base subscription prices of its rivals, Apple announced a launch date of November 1, 11 days before the scheduled rollout of Disney Plus.

Some analysts think Disney’s competitive advantage rests on its content, given its brands include Marvel, Pixar, and Lucasfilm.

The stock market reaction was what most long-time traders would call “predictable.” Both NFLX and DIS shed more than 2% on Tuesday, while APPL rallied more than 1%, and followed up with a 3% gain on Wednesday. This familiar dynamic—a high-profile, deep-pocketed company moves to grab market share in a new business, established rivals then sell off—most recently played out last Thursday when Facebook launched its dating platform and Match Group (MTCH) turned a big up day into a big down day.

A little more about MTCH in a minute. Getting back to the streaming showdown, Tuesday’s volatility was not destined to be the final word on the situation. As the following chart shows, after initially edging lower on Wednesday, DIS firmed up to close in the green, and followed through yesterday with a 1%-plus rally:

Disney (DIS), 7/9/19–9/12/19. Disney (DIS) price chart. Rebounded after Apple TV news

Data source: Power E*TRADE


After a monster spring—DIS jumped 28% from March 25 to April 29, breaking out of a nearly four-year consolidation—the stock eventually hit an all-time high of $147.15 in late July before pulling back. Shares dropped as low as $132.26 on August 7 amid an earning miss, and tested that low a couple of times over the next few weeks before rebounding roughly 7% from the August 23 low to Monday’s high. Then came Tuesday’s setback.

One thing that may have been obscured by the immediate impact of the Apple announcement was the content issue—you know, having stuff to watch on the platform—which is where some analysts think Disney has a competitive advantage, given it owns entertainment brand names such as Marvel, Pixar, and Lucasfilm (and ESPN and Hulu…).1 Anyone seen a superhero movie lately? That’s a lot of content to be able to tap into.

Apple, while reportedly budgeting a hefty $6 billion to develop content,2 will have some catching up to do there. There’s also the issue of how long it will be able to maintain its $4.99 price point.   

Make no mistake: The streaming wars are just beginning, and the participants are playing for keeps. No one can predict what the landscape will look like five years from now. But throwing your hat in the ring and winning the fight are two different things, especially when your opponent looks as big and tough as you do.

And a final observation: After a five-day, -12.6% pullback, MTCH rallied more than 3% intraday yesterday.

Market Mover Update: The S&P 500 (SPX) traded within 8.34 points of its all-time high of 3,027.98 yesterday. Alibaba (BABA) traded to its highest level since May (see “Converging stock catalysts”).

Today’s numbers (all times ET): Retail Sales (8:30 a.m.), Import and Export Prices (8:30 a.m.), Business Inventories (10 a.m.), Consumer Sentiment (10 a.m.), Baker-Hughes rig count (1 p.m.).

Today’s earnings include: National Presto Industries (NPK).

 

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1 CNBC.com. As growth falls out of favor, traders say one stock could still surge. 9/11/19.

2 Cnet.com. Apple TV Plus: Everything to know about Apple's $5-a-month streaming service. 9/11/19.

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