Streaming video services are ready to rub salt in the wounds of traditional pay TV in 2021 as they continue to attract cord-cutters.
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Netflix (NFLX), Walt Disney‘s (DIS) Disney+ and other streaming video services saw user growth soar in 2020 as the Covid-19 pandemic spurred a shift to home entertainment.
“Covid added gas to the fire,” Parks Associates analyst Steve Nason told Investor’s Business Daily. “It allowed some of these (streaming video) services to explode.”
Those services will face difficult year-over-year comparisons in 2021, as well as heightened competition, but they’re still expected to grow, analysts say. Meanwhile, traditional pay-TV services — including cable, satellite and telco services — are likely to shed more subscribers in the year ahead.
Covid-19 Accelerated Cord-Cutting Trend
In the first three quarters of 2020, the major pay-TV providers in the U.S. lost 3.75 million video subscribers, according to Leichtman Research Group. During 2019, they lost 4.92 million subscribers, Leichtmann said.
In addition to those cord-cutters, the traditional pay-TV business is dealing with cord-shavers and cord-nevers. Cord-shavers are customers who reduce the number of pay-TV channels they get, while cord-nevers are consumers, usually digital natives, who have never signed up for traditional pay-TV service.
Netflix is the top subscription video-on-demand service in the U.S., followed by Amazon (AMZN) Prime Video, based on number of subscribers, according to Parks Associates. Disney rounds out the top five with its Hulu, Disney+ and ESPN+ services.
Others in the top 10 include AT&T (T)-owned HBO Max, Apple‘s (AAPL) Apple TV+, ViacomCBS (VIAC)-owned CBS All Access and Showtime, and Lionsgate‘s (LGFA) Starz.
New Streaming Video Services Coming In 2021
More streaming video services are on the way in 2021. Cable TV programming giant Discovery (DISCA) will launch its Discovery+ streaming service on Jan. 4. ViacomCBS will debut its Paramount+ service in early 2021. Paramount+ will be a rebranding and expansion of CBS All Access.
Meanwhile, Netflix, Amazon, Disney and HBO Max are spending billions of dollars on fresh movies and TV series to retain and attract subscribers. Disney has outlined an exhaustive list of new shows based on popular franchises like Star Wars, Marvel and Pixar. And AT&T’s WarnerMedia is sending its entire 2021 theatrical film slate to HBO Max.
With cinemas closed or running at lower capacity because of Covid, most of the buzzworthy new movies are going to streaming services. Over the Christmas holiday weekend, HBO Max premiered superhero movie “Wonder Woman 1984,” while Disney+ debuted the Pixar animated film “Soul” and Netflix launched the George Clooney sci-fi drama “Midnight Sky.”
How Many Services Are People Willing To Pay For?
In 2021, consumers will test the limit of how many subscription video-on-demand services they’ll be willing to pay for, Colin Dixon, an analyst with nScreenMedia, told IBD.
“We will see a deepening of penetration (of subscription video-on-demand) in the U.S. as people add more services,” Dixon said. “Cord-cutting is going to continue to accelerate.”
Also, Parks Associates says 61% of domestic households subscribe to two or more streaming video services, as of the third quarter. Some 45% of homes subscribe to three or more services. And 31% subscribe to four or more services.
“2021 will be the year we see a leveling off of the service stack — the number of services that people will stack on top of each other,” Parks analyst Nason said. Meanwhile, growth rates for major services like Netflix and Hulu will start to slow, he said.
Consumers Adding Niche Streaming Video Services
While subscribing households typically have about three subscription video-on-demand services, they are supplementing those paid services with free, advertising-supported services, Nason said. Ad-supported video-on-demand services include the Roku Channel from Roku (ROKU), IMDb TV from Amazon and Peacock from Comcast (CMCSA) subsidiary NBCUniversal.
In addition to general interest streaming video services, there are scores of niche services. For example, CuriosityStream (CURI) offers science, nature and documentary content. Shudder from AMC Networks (AMCX) specializes in horror movies. And BET+ from ViacomCBS is devoted to Black culture entertainment.
“Consumers are now ready to start taking on niche services,” Dixon said. “People have got the general stuff. Now they’re looking to add services that feed a particular interest.”
Parks Associates says U.S. consumers today can choose from nearly 300 subscription streaming video services.
Shakeout Seen Over Next Two Years
Discovery Chief Executive David Zaslav said the winners and losers among streaming video services will be determined over the next 24 months.
“Within the next two years, it’s going to be put up or shut up for all of us,” Zaslav told CNBC earlier this month.
Further, he expects the fiercest competition among large streaming video services primarily focused on scripted series for U.S. audiences.
“Will there be three? Will there be four? There’s not going to be seven,” Zaslav said. “There has to be some consolidation.”
Some consolidation is already occurring.
Sony, ViacomCBS Lead Consolidation Wave
On Dec. 10, Sony‘s (SNE) Funimation announced a deal to buy rival anime streaming video service Crunchyroll from AT&T for $1.175 billion.
Also, ViacomCBS plans to close several niche streaming services and move that content over to Paramount+. Analysts predict that MTV Hits, NickHits, Comedy Central Now and Noggin will be shut down in the move.
Apple TV+ might have to bulk up its content library to stay relevant as well.
Wedbush Securities analyst Daniel Ives said 2021 could be the year that Apple acquires a Hollywood studio to buck up its Apple TV+ content. News reports say Apple recently passed on a deal to buy MGM. But it might make a play for Sony Pictures, Lionsgate or A24, Ives said in a recent note to clients.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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