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Netflix benefits from TV’s decline. Can Disney and AT&T?

New analysis suggests Netflix’s share of digital viewing minutes will decline because of Disney+ and HBO Max. That said, all will continue to grow as traditional TV declines, and Netflix stands to gain much more from the trend than Disney and AT&T.

Netflix, YouTube to lose digital viewing share

A new forecast from eMarketer shows the potential impact on Netflix and YouTube by new Internet TV entrants from Disney, Apple, and AT&T. Even as YouTube and Netflix continue to grow the average time viewers watch content on their services through 2021, their overall share of digital viewing will decrease.

For example, eMarketer forecasts that the average U.S. adult will watch 29 minutes per day on Netflix in 2020, and 30 minutes in 2021. However, the company’s share of digital viewing minutes will fall from 27% in 2019, to 25.7% in 2021. eMarketer says the decreasing share is due to new entrants Disney+, HBO Max, and Apple TV+.

Netflix will remain in a dominant position

Though eMarketer shows some of Netflix’s market dominance dissipating over the next two years, the company will remain in an enviable position. According to Nielsen, the average U.S. adult spent 5 hours and 46 minutes per day with video. In other words, Netflix alone represents 10% of the time people spend watching every day.

Disney+ is targeting 20 to 30 million subscribers in the U.S. by 2024. If it reaches 10 million by 2021 and subscribers use it as much as Netflix today, it will only occupy about 1% of the average adult’s viewing time. It is also doubtful that adults will use the service as much as Netflix unless Disney increases original production dramatically over the next two years.

Traditional TV’s decline could be a net loss for Disney, AT&T

Over the last several years, the amount of time people spent watching traditional TV has decreased. What’s more, the decline is accelerating. In Q1 2016, people watch 3 minutes less per day of conventional TV. In Q1 2019, they watched 19 minutes less than the previous year. Much of the decrease in TV viewing goes directly to internet TV services.

If we assume the 2019 decrease repeats in 2020 and 2021, people will be watching an hour less traditional TV per day in 2021 than in 2018. However, with new enticing services like Disney+ and HBO Max, it could be that the decline in traditional TV viewing accelerates. That could lead to an hour and quarter or more decrease in viewing.

Disney, AT&T face risks Netflix does not

The decline in TV viewing represents a significant risk for Disney and AT&T. With decreasing TV viewership, the value of their TV channels could fall dramatically. AT&T understands the value equation well. It has lobbied TV channel providers to accept usage-based pricing rather than the standard license fees for inclusion in its vMVPD products. So far, the company’s WarnerMedia is the only channel provider to agree. Disney, on the other hand, continues to demand top dollar for premium properties like ESPN and ABC.

Both AT&T and Disney must now deal with the fact that there is no guarantee that the lost value in TV channels can be recaptured with their online offerings.

Netflix and other digital native TV services can only benefit from the decline of traditional TV. In a very real sense, traditional TV’s loss is their gain.

Why it matters

New SVOD services from Disney and AT&T will begin to cut into Netflix’s share of digital viewing minutes.

However, all will continue to grow viewing times as consumers shift more TV viewing to digital.

Disney+ and HBO Max will help accelerate the decline in value of Disney and AT&T owned WarnerMedia TV channels.

There is no guarantee the value generated by Disney+ and HBO Max will recoup the lost TV channel value.

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