The coronavirus pandemic and the "stay-at-home" orders that have followed have led to a number of changes in Americans' daily lives. Office workers and students stuck at home have relied on video calling for classes and conference calls. Americans have stockpiled goods like food, toilet paper, and cleaning supplies, and have relied on grocery delivery services to bring them their orders.
And demands for home entertainment have soared, as people look for a distraction from the monotony of life at home during a pandemic. No sector is benefiting from that last trend more than streaming services.
Roku (ROKU -2.07%) just announced that first-quarter streaming hours are expected to jump 49% from the previous year to 13.2 billion. Based on the 39.8 million active accounts it had at the end of the quarter, users streamed an average of 3.6 hours a day of entertainment, the company's highest figure in at least a year. By all indications, video consumption jumped toward the end of the quarter; management said the effect of "sheltering at home" led to an acceleration in new account growth and viewing hours.
Roku wasn't the only one seeing a spike in demand. Walt Disney (DIS -0.72%) said last week that Disney+ subscriptions had already reached 50 million just five months after its launch, as the new service has recently expanded to Western Europe and India. Hulu, the streaming service now majority-owned (and fully controlled) by Disney, has also experienced increased viewership; it said that among growth in other areas, live-news watching was up 40% in mid-March.
Netflix (NFLX -1.80%), the world's leading streaming service, hasn't provided any specific data on customer response during the crisis. But the stock surged to a 52-week high on hopes for a strong earnings report next week, and there's plenty of outside evidence that Netflix's popularity is only gaining during the pandemic. European governments have asked the company to slow down its feed from high definition to standard definition, so as not to strain the already-stressed internet infrastructure on the continent.
According to streaming aggregator Reelgood, streaming hours in the U.S. doubled from the first week of March to the first week of April, and Netflix took the lion's share, with 41.3% of hours streamed by Reelgood's 2 million users. Amazon (AMZN -1.26%) Prime Video grabbed second place, with 22.1% share; this shows that the e-commerce giant remains a strong competitor in streaming, though its e-commerce business has gotten most of the attention during the crisis.
Why the good times will continue
New subscribers to these services are likely to stick with them even as we enter a recession. In fact, the economic downturn could even benefit streaming services, by driving more subscribers away from traditional pay TV and toward streaming. The absence of live sports on Disney-owned ESPN and other channels is likely helping push viewers to cut the cord, and a recession could have a similar impact, causing consumers to trim discretionary purchases like cable. By comparison, the value of streaming services, which often cost the viewer $0.25 per hour or less depending on time spent on the service, is clear. The low prices and auto-billing of services like Netflix make them difficult to quit, which should help these companies retain new users.
The fallout from the pandemic and the recession is already starting to impact traditional rivals. Satellite TV operator DISH Network (DISH -1.30%) said yesterday that it would lay off staff and reevaluate its business, as the loss of subscribers to cord-cutting only seems to have accelerated with the coronavirus crisis and the economic shock that's come with it.
Streaming stocks, however, should only benefit from the hardship facing their legacy competitors. With Americans stuck at home and cutting back on spending, streaming services should continue to reap gains as they offer a cheaper alternative to traditional pay TV, one in high demand due to shelter-in-place orders.
We've already seen sign-ups for Disney+ and Roku surge in recent weeks. Expect the same when Netflix reports earnings next week.