The Golden Age of TV Content?

With so much intriguing content and new shows on TV over the past few years, you may call this the golden age of TV content.  New non-traditional players such as Amazon, Netflix, and Hulu are now spending billions on their own original content vs. the traditional media pillars of Disney, Fox, HBO, and Showtime.  And as more and more people cut the cable cord to opt for one of the new streaming services, are people getting what they want?  And if not, how much is it going to cost them?

Breaking Down the Cost

Think about this: what if you’re an avid fan of The Hands Maid Tale, Orange is the New Black, Game of Thrones, and The Marvelous Mrs. Maisel?  All four of these hit original content shows are offered only via a paid service offering such as Hulu, Netflix, HBO, and Amazon, respectively.  Let’s break down the cost of each service to watch these great shows.

• Hulu – $7.99 per month for commercials or $11.99 per month for commercial-free
• Netflix – $10.99 per month for standard
• HBO – $15 per month but packaged with other service providers could be lower
• Amazon Prime - $10 per month

So, totaling up these four services comes up to $44 to $48 per month or between $528 and $576 annually based upon current pricing. This cost would be on top of any current cable subscription such as Comcast, or DirecTV, or any of the new live streaming services such as DirecTV Now, Sling, or PlayStation VUE.  And don’t forget to add the cost of internet access.Can you see where I am going with this?  Your content consumption bill can really begin to add up in a hurry.  And as more content service providers spend even more on content, do we believe that the current prices will not go up (with maybe the exception of Amazon)?  I would expect to see continued inflation in the entertainment business.Although devices such as Amazon Fire, ROKU, and Apple TV devices can bring all these content service providers into one place, the content will likely continue to remain very decentralized.  This decentralization, as I pointed out previously, could become costlier than the traditional cable service offerings with certain limitations.

The Winner is...

The clear winner in this golden age of content has been Netflix and to some degree, Amazon with their Prime offering.  But what is shocking to me is that if the content is so important why has Disney not kept pace at all with Netflix over the past three years with their blockbuster content lineups such as Star Wars, Marvel, and new Disney princesses?Disney and Netflix are worth the same value at roughly $15 billion.  There is a striking difference between how investors value each company as investors are currently willing to pay 218 times for Netflix earnings vs. only 14 times for Disney earnings.  That is a magnitude of 15.5 times greater between the two companies.Disney is in the process of developing and launching its own streaming service.  And although struggles at their sports giant ESPN have been working against them, it’s hard to bet against the diverse revenue streams that Disney brings to the table.  If the cable unbundling and cord cutting continue, don’t be surprised to see Disney flex its muscle with a more competitive monthly subscription offering as well.