For context, Netflix's (NFLX) - Get Report competitors include not only Disney and Apple but also Comcast (CMCSA) - Get Report , AT&T's (T) - Get Report HBO and Amazon's (AMZN) - Get Report Amazon Prime.
"Can both Apple and Disney be winners on streaming?" Ives asked. "Our answer is `yes.'"
As the saying goes, "content is king," which should render Netflix king, right? Fine. But:
"With content being king and Netflix the clear leader in streaming with roughly 160 million subscribers worldwide, the goal of Disney and Apple is clearly shaking this leadership position, as we continue to believe that 10%+ of Netflix's installed base could be disrupted/higher churn by these two stalwarts entering the streaming landscape," Ives said.
First, with all the supply coming in, subscribers may very well put more emphasis on price for their subscription decisions, Ives noted. Apple TV+ costs $4.99 and Disney+ $6.99. (Many think Apple will invest in more content and raise prices later.)
Second, streaming adoption is potentially still in growth mode worldwide. "I see a secular shift in changing consumer behavior -- they're moving to over the top," D.A. Davidson & Co. analyst Tom Forte told TheStreet.
While streaming has been widely adopted in the U.S., Netflix, which many analysts use as a measuring stick to model the new streaming players, is currently expected to add 24 million and 23 million international subscribers in 2020 and 2021, respectively. That's according to FactSet's poll of analysts.
And subscribers could sign up for multiple platforms. With current price points, people can subscribe to Netflix, Apple TV+ and Disney+ for just $21 a month, said RBC Capital Markets analyst Mark Mahaney. About two-thirds of users in an RBC survey said they're interested in subscribing to more than one streaming service.
Ives sees "room for consumers to add 1-2 more streaming services onto their entertainment monthly budgets as the cord-cutting theme further takes hold into 2020. [And] there will be multiple winners with both Apple and Disney in a strong position to find success on this front."
So what makes Disney and Apple special to Ives? He noted the assets both companies can leverage (aside from cash, which every new competitor in the space has plenty of).
Apple has the iPhone and the rest of its suite of devices. Moreover, Apple is offering a free trial for streaming for a year for anyone who buys one of the newest iPhone 11 models. That gets a subscriber in the door and enables Apple to start investing more in content. Currently, Apple has a "Morning Show" squared away, featuring Steve Carell and Jennifer Aniston, but not much else.
Disney has a huge backlog of content. Apple is a tech company, but content is Disney's bread and butter. New and original content is key and Disney certainly wants to assert itself there, but it's not worried about quantity of content for now. Disney also has a sizable theme-park business that it can use to get subscribers in the door.
As for content backlog, HBO and Comcast have plenty of that.
Bottom line: Investment exposure to streaming is far from zero-sum.