Netflix (NASDAQ:NFLX) appears to be on top of the world. It had nearly 104 million streaming subscribers worldwide at the end of June, and continues to widen the gap on the distant competition with every passing quarter.
It's good to be the king, and for Netflix, the economies of scale seem to offer a pretty impenetrable moat. Will anyone ever close in on a nine-figure digital paying audience? Can anyone take on the $15.7 billion in streaming content obligations that Netflix has without a similar-sized audience? Unfortunately for Netflix, a plethora of hungry and, in some cases, smart companies don't need to reign supreme to disrupt Netflix's dominance. Amazon.com (NASDAQ:AMZN), Roku (NASDAQ:ROKU), CBS (NYSE:CBS), Time Warner (NYSE:TWX), and even Disney (NYSE:DIS) can all prove to be a thorn in the side of the streaming entertainment leader, and that's just talking about publicly traded stateside players. Let's go over a few companies that can eat into Netflix's numbers.
The top dog in video has made no bones about the value proposition of its rival offering. Amazon makes Prime Video available at no additional costs to its tens of millions of Prime members. The breadth of Amazon's content used to be an issue initially, but it's been able to flesh out its vault with stuff, and now it's winning Emmy awards for some of its original fare.
Amazon is scarier than you think because it doesn't have a problem sacrificing near-term profits for the sake of market share. Earlier this week, it introduced a broad line of infotainment hardware at aggressive price points, and in some cases, it makes accessing Prime Video content easier.
The pioneer in set-top streaming devices went public on Thursday morning. The deal priced at $14, the high end of its initial range. Roku has been an ally of Netflix over the years, making it easier for couch spuds to access the perpetually expanding catalog of Netflix content. However, Roku also claims to offer more channels than any other streaming player, and that's another way of saying that it offers up more streaming alternatives to Netflix than anyone else.
There is power in controlling the experience even if you don't own the content, something that Netflix knows all too well since the vast majority of its offerings are licensed. If Roku keeps growing as a leading gateway to digital entertainment -- something that should be even easier after the IPO -- it will continue to level the playing field for Netflix rivals. Netflix has benefited from the cord-cutting revolution as folks ditch their expensive cable and satellite television bundled packages, but will it hold up when consumers have a ton of viable platforms and they can't conceivable pay for them all? Roku has seen its active accounts soar 43% to 15.1 million over the past year. Netflix can't ignore the great streaming platform leveler.
A traditional broadcast network may seem to be an odd fit on this list, but CBS did something interesting over the weekend. It aired the first episode of Star Trek: Discovery -- the first new Star Trek series in more than a decade -- on CBS, but every subsequent episode is streaming exclusively on CBS All Access.
CBS All Access offers streaming access to live local CBS feeds and 9,000 episodes of current and previous network shows for $5.99 a month. There's an ad-free version for $9.99 a month. The catalog will be a sliver of what Netflix is doing, but CBS's slick move of giving the masses a taste of Star Trek: Discovery on its over-the-air platform -- an old Vulcan "bait and switch" trick -- is genius. The show attracted 9.6 million viewers, and if only a handful of those make the digital leap into the final frontier, CBS All Access will easily meet its goal of 4 million online subscribers by 2020.
Netflix CEO Reed Hastings has historically mentioned Time Warner's HBO -- and not Amazon -- as his company's most prominent competitor, and that was before HBO GO and HBO Now emerged on the scene. Time Warner's HBO remains a hit factory, and even after the final season of Game of Thrones plays out in two years, it's a safe bet that it's going to be a hub of original content that makes most platforms envious.
The knock on Time Warner's HBO GO is that it was only available to video buffs with existing HBO subscriptions which in turn is only available on top of a pricey cable television package. HBO Now changes the rule, as it's available on a stand-alone basis.
HBO's batting average is impressive. Even in late-night TV -- turf that Netflix is taking a half-hearted swing at with Chelsea -- Netflix doesn't have an answer for the Emmy-snagging Last Week Tonight With John Oliver. If you look beyond HBO, keep in mind that Time Warner also owns DC Comics at a time when Netflix just moved to acquire the much smaller Millarworld.
Netlfix has been a lucrative distribution partner for Disney, but that's about to change as the House of Mouse rolls out a dedicated ESPN streaming service early next year. Live sports has never been in Netflix's wheelhouse, but the ESPN platform is just the first step before Disney launches a broader Disney-branded platform come 2019.
Disney will be less likely to renew content deals with Netflix once it has its own platform to feed, and if CBS All Access has gained any kind of traction with its strategy of teasing mainstream audiences with shows on CBS, one can only imagine that Disney will follow suit on ABC.
Amazon, Roku, CBS, Time Warner, and Disney can't singlehandedly take down Netflix, but together they can blur the marketplace as viewers cherry-pick the platforms that they want.
Rick Munarriz owns shares of Netflix and Walt Disney. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney. The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy.
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