Netflix, Disney+ may get a boost from the coronavirus
If people are forced to stay inside, they're likely to turn to streaming services for entertainment, according to analysts
While many stocks have taken a dive amid what has become a global coronavirus outbreak, some analysts are predicting large streaming services like Netflix and Disney+ may see an uptick in subscriber counts and shares while more people opt to remain indoors and forgo more public entertainment like movie theaters, concerts and other crowded areas.
NETFLIX DOMINATES TV VIEWING: NIELSEN
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| NFLX | NETFLIX INC. | 897.74 | +10.93 | +1.23% |
| DIS | THE WALT DISNEY CO. | 117.16 | -0.31 | -0.26% |
“If this coronavirus issue picks up steam a lot more than it has already and a lot of people aren’t leaving their homes or are fearful to leave their homes, it may be more likely to buy an over-the-top media subscription or pull like Netflix or a Disney+ or what have you,” Craig Huber, CEO and managing director of brokerage Huber Research Partners told FOX Business. "If you’re trapped at home you probably watch more television. And it might lead to more OTT signups, digital signups and stuff.”
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Huber also noted that consumers may be more willing to sign up for these streaming services, if they aren’t already, considering that monthly subscription fees are very affordable compared to a night out on the town.
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Other streaming services could benefit similarly, however, Huber said Netflix might have an edge since it is “more globally distributed.”
Netflix's shares rose 4.8 percent to $377.14 in morning trade, which snapped the company’s five-day streak of losses. Though, it is not clear whether this can be attributed to coronavirus’ spread. Overall, the stock has gained approximately 17 percent so far this year, and the company has a market value of around $161.8 billion.
A person displays Netflix on a tablet in North Andover, Mass. Netflix, Inc. reports financial results, Monday, July 17, 2017. (AP)
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Last quarter, Netflix successfully added 8.8 million subscribers internationally, which exceeded many analysts’ expectations. The company indicated it expects to add around seven million subscribers this quarter. That projection does not account for the possible coronavirus effects. However, in the case of the coronavirus subsiding, Huber doesn’t think Netflix’s normal trajectory of growth of digital subscribers will get hurt.
Although it does seem likely that people may turn to binge-watching if they are trapped inside their homes, ReachTV’s CEO Lynnwood Bibbens noted that it would also cost streaming services a significant amount to deliver content if usage and demand were to spike drastically.
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"Antalya, Turkey - May 6, 2011: iPad is on the Apple Macbook Pro. Youtube logo on iPad screen. Youtube is the largest video sharing website in the world."
Most non-ad-supported streaming services greatly benefit from its subscribers' passive viewership and continuous payments rather than excessive binging, Bibbens told FOX Business.
“I think what really benefits in this type of a scenario is the ad-supported platform,” Bibbens said. “When you're constantly watching the ad-supported platforms, they get more, they get to serve more ads. So all of that is the key for companies like Comcast, which bought Xumo, and Viacom, which bought Pluto. The YouTubes and Hulus of the world, those types are the future of TV.”
He also noted that bundled streaming services are likely to benefit from a pandemic situation. For example, Disney’s low $12.99 bundle of Disney+, Hulu and ESPN+ may be an attractive offer for a recent cord-cutter who is still trying to get a cable-like feel whereas Netflix plans range between $8.99 and $15.99 without offering daily news programs – something that some might think is crucial if the coronavirus truly forced people to stay inside.
A Disney logo forms part of a menu for the Disney Plus movie and entertainment streaming service on a computer screen in Walpole, Mass. (AP Photo/Steven Senne, File)
However, with so many streaming services available today, it is also difficult to name a clear-cut winner in the case of the coronavirus worsening.
For investors who are looking at the long-term, buying Netflix shares based on coronavirus fears may not be the best move, according to Bibbens.
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“If you're looking for short term gains, I would look to things that are directly affected,” he said, and suggest that investors who go that route should only do so if they think the coronavirus will be sustained for a 30- to 60-day period. “Or If not, I would focus on some kind of pharmaceutical.”