Netflix (NFLX -0.66%) shareholders knew that November was going to be challenging with Disney's (DIS 2.46%) Nov. 12 launch of Disney+, aggressively priced at $6.99 a month. There were already rumblings that Apple (AAPL 0.48%) would be making its own streaming video service available that month at a competitive price point, but the news is worse than Netflix investors feared on both fronts.
Apple announced on Tuesday that it will be launching Apple TV+ on Nov. 1, nearly two weeks ahead of Disney's rollout and literally the earliest November launch possible. Pricing is going to be an even bigger potential problem for Netflix and perhaps even for Disney. Bloomberg was reporting last month that Apple TV+ was considering a $9.99 price point, but reality is half that ransom. Apple's new premium digital video smorgasbord will hit the market at just $4.99 for a family subscription.
Making molehills out of mountains
Things could get even more challenging for Netflix than just having Disney and Apple in the market with cheaper monthly prices for platforms with highly anticipated original programming. Apple also announced on Tuesday that it will provide Apple TV+ free for a year with the purchase of most of its devices. In short, the floor may be even lower than $4.99 a month.
Disney already turned heads by offering Disney+ to members of its D23 fan club at 33% off the annual rate if they prepay for three years. That promotion ended, but now it's offering holders of the Disney-branded Visa credit card deep discounts on two- and three-year subscriptions. Between Apple lumping a free year of Apple TV+ access in with the devices it will sell and Disney now with a likely substantial audience of folks locked in for a couple of years, will Netflix be able to stand out at its now seemingly out-of-touch price point of $12.99 a month?
At best, Netflix has lost any flexibility to boost its prices in the near term the way it has four times over the past five years. At worst, consumers will have to choose between platforms. There is definitely room for more than one winner here, but is a month of Netflix going to be valued more than a month of Apple TV+ and Disney+ combined? We'll probably have to wait for Netflix's fourth quarter to play out before getting a definitive answer to that.
In an ideal world, Netflix would actually benefit from the launch of two prolific streaming services. Anyone still paying fat cable and satellite television bills come December is nuts. There will be enough money saved by cord-cutters to trickle down to all of the leading services, and Netflix has done a good job of establishing itself as the "basic cable" standard of streaming. It's hard to be against Netflix, but until we know for sure, investors will be skittish as they approach the former market darling. Video-hungry consumers can and will do only so much discretionary spending. There's a lot of great streaming TV coming in November, and Netflix needs to make sure it still has top billing in your living room.