Streaming Services Face Judgment Day. Netflix Is In A Lonely Spot.

Consumers who binged on streaming video services when they were cheap might be inclined to purge them after recent price hikes. That’s created a survival-of-the-fittest climate for the numerous subscription video-on-demand services struggling to compete with market leaders like Netflix and Amazon.


Industry pioneer Netflix (NFLX) is the only major player making money with its subscription streaming video service. The rest are hunting for a winning formula to compete in a crowded — and cutthroat — market. Now, Wall Street analysts say the streaming video industry is poised for consolidation.

“We’ve entered a new phase in the market,” nScreenMedia analyst Colin Dixon told Investor’s Business Daily. “Companies are done with growing subscribers at all costs and now they’re focused on profits. But there is a limited number of levers they can pull to boost their profitability.”

Streaming Video Business Levers

One problem is all of those levers — raising prices, cutting costs by reducing content spending, and running more ads — are bad for customer experience. And therefore likely bad for business.

That’s why some Wall Street analysts say the market climate will spur mergers and partnerships as the various players look to survive. There are about a dozen mainstream general-interest streamers duking it out for the same customers in the U.S.

“This industry needs four or five players,” Michael Nathanson, an analyst with investment research firm MoffettNathanson, told IBD. But “it’s just not very obvious how that happens.”

One key hurdle involves companies with heavy exposure to the declining traditional pay-TV business. That includes content producers who support legacy cable TV channels.

“These companies need to stem the losses of streaming because their core businesses are being hit by cord cutting, slowing advertising and a weak box office,” Nathanson said.

In fact, investors are pressuring companies like Walt Disney (DIS), Warner Bros. Discovery (WBD) and Paramount Global (PARA) to start showing positive results from their streaming services.

Price Hikes Galore At Major Streaming Services

Companies with subscription video-on-demand, or SVOD, services are trying to shore up their operations by raising prices and cutting costs. They’re also cracking down on account sharing to convert freeloaders into paying customers.

In mid-October, Netflix increased the price of its ad-free Premium plan by 15% to $22.99 a month. Meanwhile, Disney raised the price of its ad-free Disney+ service by 27% to $13.99 per month. And Apple (AAPL) hiked the price of Apple TV+ by 43% to $9.99 a month.

Prices also have gone up this year at Comcast‘s (CMCSA) Peacock, Paramount’s Paramount+ and Warner’s Max.

Those price hikes likely will lead to increased churn as customers quit some services to save money.

“In general, whenever there’s a meaningful price hike, we do observe a bump in churn,” Bernstein analyst Laurent Yoon told IBD.

The churn problem is worse for companies outside of the top three or four services, Yoon says. For the top services, such as Netflix and Disney+, there’s an initial increase in churn but subscriber numbers tend to normalize after a few months, he says.

Besides Netflix, other top services include‘s (AMZN) Amazon Prime Video and Disney-controlled Hulu.

To survive and thrive, streaming video services need a steady stream of new content to keep subscribers engaged. But that takes significant resources that only large companies can handle, Nathanson says.

Netflix, for instance, plans to spend $17 billion on content in 2024, up 31% from $13 billion this year.

Subscale Streaming Services At Risk

The streaming video services in the biggest pickle now are those that are considered subscale: Paramount+ and Peacock, and services offered by AMC Networks (AMCX) and Lionsgate (LGFA), analysts say.

“Most content players with SVOD offerings are losing material dollars, which may lead to shuttering of offerings and/or consolidation in streaming offerings,” Pivotal Research Group analyst Jeffrey Wlodarczak said in a recent client note.

Some consolidation is already occurring. Paramount merged its Showtime streaming service into the premium tier of Paramount+ in June. On Nov. 1, Disney agreed to take full ownership of Hulu by buying Comcast’s 33% stake in the streaming service for an expected $8.61 billion. Disney hopes to complete the deal in 2024.

While consolidation might seem obvious given the challenges in the market, it will likely take longer than most people think, Parks Associates analyst Eric Sorensen told IBD. That’s because of a host of factors, including regulatory issues and dealing with the legacy businesses that many companies have, especially pay TV.

Content Distribution Partnerships In Vogue

Some SVOD players are trying to stay viable by leaning into advertising-supported video on demand and forging content distribution partnerships to bundle their services, Sorensen says.

Among the streaming bundles, Paramount+ is now bundled with retailer Walmart‘s (WMT) membership program, Walmart+. In addition, Paramount has discussed a streaming bundle with Apple TV+, according to the Wall Street Journal.

On Nov. 29, Comcast’s Peacock streaming video service and Maplebear‘s (CART) Instacart grocery-delivery service announced a deal that would give customers of Instacart+, who pay $9.99 a month, access to Peacock with ads at no additional cost.

This month, Verizon (VZ) began offering a streaming bundle of the ad-supported versions of Netflix and Max for $10 a month combined instead of about $17. Verizon is offering the deal to its myPlan wireless customers.

Meanwhile, Warner has taken to licensing some premium library content to rival Netflix to shore up its finances. That content includes HBO series like “Band of Brothers” and “Six Feet Under” and DC superhero movies like “Man of Steel,” “Wonder Woman” and “The Batman.”

Streaming Video Market Grows Saturated

But it’s unclear if these efforts are enough to overcome the major challenge: There are simply too many streamers out there. In addition to the mainstream streaming video services, there are scores of niche services devoted to genres such as British television, Nordic noir, Japanese anime, horror movies and documentaries.

The U.S. streaming video market is “extremely saturated,” Sorensen said. The average streaming household subscribes to 5.6 streaming services, according to Parks Associates.

Some 89% of broadband households have at least one subscription video service. And 29% of broadband households have eight or more such subscriptions, Parks says.

Most streaming video services now offer lower-priced, ad-supported service tiers to lower churn and buck up their finances. Netflix, Disney+, Paramount+, Max and Peacock have all found that revenue per user is higher on ad-supported plans when compared with ad-free subscriptions.

Netflix reported on Nov. 1 that it reached 15 million monthly active users worldwide of its advertising-supported service, one year after launching the offering.

Relearning To Be ‘Ad Tolerant’

Running ads is, of course, a tricky revenue-driver. Many consumers aren’t thrilled to sit through ads after experiencing ad-free services.

“You can persuade some people to watch with ads,” Dixon said. “But I have a feeling that you can’t persuade a great deal of them.”

He added, “Come on, who really wants to be watching ads when you’re completely engrossed in an episode of ‘Loki’ or the latest Avengers movie? You just don’t want it.”

Parks analyst Sorensen said consumers are having to “relearn” how to be “ad tolerant.”

The growth of free, ad-supported streaming television, or FAST, services shows that consumers are willing to put up with ads to save money, Sorensen says.

Some 41% of U.S. broadband households watch ad-supported video-on-demand services now. That’s up from 18% in 2018, Parks says.

Meanwhile, consumers who saved money by cord cutting and switching from cable TV to streaming have found their monthly video bills back to where they used to be. And now they’re in the position of having to bundle their own video programming package.

“It’s ironic,” Nathanson said. “It turns out the cable bundle was actually pretty good. You got all those channels in one place for one price.”

Analysis Of Streaming Video Stocks

Among stocks with a stake in streaming services, Netflix is one to watch now. The company has posted two quarters of accelerating earnings growth. On a technical basis, Netflix stock is forming a cup-with-handle pattern with a potential buy point of 482.70. Netflix stock closed Thursday at 452.

Amazon is on the IBD Leaderboard list of timely growth stocks. Amazon stock broke out of a cup base with a 145.86 buy point in November and is trading within the 5% buy zone, which goes to 153.15.

Apple stock, meanwhile, has made big gains from its 2022 lows. It broke out of a cup-with-handle base Tuesday and remains in buy range from its 192.93 entry.

As for the others, AMC Networks, after a long, steep slide starting in 2021, broke out of a first-stage cup base in early November. But AMC Networks stock is now extended from the 15.59 buy point.

Disney stock has retaken its 40-week line after its own long, deep correction, but shares need more time to form a base.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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