Media

Apple TV+ Faces Hurdle as Netflix Subscriber Count Tops 200 million

Netflix Inc. (NASDAQ: NFLX) posted extraordinary figures for its 2020 fourth quarter. Its global subscriber base reached 203.66 million. The company forecast that the number will be 209.66 million by the end of the current quarter. It was up from 195.15 million at the end of the third quarter and from 167.09 million at the end of the same quarter the year before. The results show how high a mountain Apple TV+ and other companies that have entered the video streaming wars have to climb to reach the top tier of the industry.

Netflix’s increase in subscribers turned into a financial success. Revenue for the period was $6.64 billion, up from $5.47 billion in the same quarter the year before. Operating income was $954 million, up from $459 million. Management summed up the year in its letter to shareholders: “For the full year, we added a record 37m paid memberships, achieved $25 billion in annual revenue (+24% year over year) and grew operating profit 76% to $4.6 billion.”

Netflix said its cash flow was such that it will not need to borrow more money, particularly to add to its library of original content. That means the single problem that might hold its expansion back no longer exists. The news drove Netflix’s market cap close to $250 billion.

Netflix operates in a rarified atmosphere with Amazon Prime’s video service, the U.S. subscriber count of which has been put as high as 130 million. Amazon.com Inc. (NASDAQ: AMZN), with a war chest of money and hundreds of millions of customers, has tools competitors can only imagine.

Next down the pole of streaming services, Disney+ claims its subscriber base was 86.8 million in December, on its way to what Walt Disney Co. (NYSE: DIS) believes will be 240 million to 260 million by the end of its fiscal 2024. That number is little more than a guess, given how fierce competition has become. However, Disney+ does have access to the Disney, Pixar, Marvel and Star Wars libraries.

Apple TV+ operates another tier down, along with several other services, the most visible of which, recently has been HBO Max. Operated by parent AT&T Inc. (NYSE: T), its primary appeals are the HBO and Warner Bros. libraries. HBO Max will release Warner Bros. 2021 films online at the same time each reaches theaters, which will presumably help it build a base.

Apple TV+ does not have libraries to match these rivals. It has released a number of original programs, but its backlog library is modest. One advantage it has is a low price point of $4.99 a month. The growth of a subscriber base also will be aided by the huge number of hardware devices Apple Inc. (NASDAQ: AAPL) sells. Apple TV+ will come free for a year with the purchase of a new iPhone, iPad, iPod Touch, Apple TV or Mac. That count could be in the hundreds of millions. It is a marketing asset that rivals cannot match.

The streaming services have all benefited from the extent to which the pandemic has shut people in their homes. Nevertheless, people will only use so many services at once. It is estimated that people will pay for only three services at one time.

Apple has a long road to elbow itself to the center of the streaming wars. Netflix showed how competitive the industry continues to be.