If you thought people would cancel their video-streaming subscriptions in 2021 and start going out more, think again. Americans will add 50 million net new video subscriptions this year, according to analysts at UBS. That's up from a 47 million increase in 2020.
New streaming entrants, more cord-cutting, and more big film releases going to streaming are all pushing that number higher. Here's what investors need to know, as well as the best way to capitalize on the continued shift toward these services.
Which streaming services are Americans adding in 2021?
The majority of net additions this year will come from four services, according to UBS. Walt Disney (NYSE:DIS) and ViacomCBS will each add eight million to their flagship streaming banners, Disney+ and Paramount+. AT&T (NYSE:T) and Discovery will add seven million net new subscribers to HBO Max and Discovery+, respectively.
Disney already has around 40 million U.S. subscribers for Disney+, but there's still room for growth. With an expanding slate of original content and a very competitive price -- even after a price hike last month -- it's sure to keep growing.
ViacomCBS is investing a lot in Paramount+, both in content and marketing. It's building on the legacy CBS All Access service with lots of new and old titles from Viacom's cable networks. It also includes a live stream for CBS networks and some live sports content. UBS says live sports will play a key role in retaining subscribers in 2021.
HBO Max found its footing when it started releasing Warner Bros. films simultaneously with the theaters at no extra charge for subscribers. Those releases will continue in 2021 with major films including Matrix 4 and Space Jam 2. However, AT&T will end that release strategy in 2022.
Finally, Discovery+ got off to a hot start. The media company said it had 11 million subscribers as of its fourth-quarter earnings report on Feb. 22, and it expected to add another one million by the end of the month. Those are global subscribers, but Discovery has been marketing the service a lot, indicating good traction, and it could quickly surpass that seven million estimate from UBS.
Which aren't they adding -- because they already have them?
Netflix managed to add 6.3 million subscribers in the U.S. and Canada last year, but investors shouldn't expect a repeat. Netflix gained just over one million subscribers in the region in the second half of the year, returning closer to 2019 levels. It added around three million subscribers in the U.S. and Canada two years ago. The UBS forecast suggests it won't give back many of the subscriber gains from 2020.
Likewise, Amazon had a strong year in 2020 as more shoppers signed up for Prime to get its shipping benefits but stuck around for its streaming service. Amazon doesn't disclose how many Prime members it has, but investors should expect 2021's focus to be on retaining the gains from last year.
Hulu and ESPN+ may benefit from the continued growth of Disney+. Hulu added nine million total subscribers last year while ESPN+ added over five million. Disney's streaming bundle has proven very popular and could lead to a couple million more viewers for Hulu and ESPN+ each.
The biggest winners
While all of the above media companies should see good subscriber growth for their streaming offerings, the big winners may be the streaming platforms, Roku (NASDAQ:ROKU) and Amazon.
There are a couple main reasons.
The majority of platform revenue for Roku and Amazon's Fire TV comes from advertising. While most of the aforementioned subscription streaming services don't have ads, both companies can still sell ads on their home screens, encouraging users to subscribe to a service or watch specific content. As competition increases, the price for those ads increases.
Furthermore, increased engagement with subscription streaming services should lead to more engagement with free ad-supported services like The Roku Channel or IMDbTV. Even if it's a third-party AVOD (ad-supported video-on-demand) service, Roku and Amazon take a share of ad inventory for themselves.
On top of the potential ad revenue growth from increased streaming subscriptions, Roku and Amazon may become more popular as a payments avenue for subscriptions. While UBS expects continued growth in net additions, the growing competition should increase churn as well. If Roku and Amazon can make it easier for viewers to hop from one service to another, they could win share of subscriptions used on their platforms. That could lead to a greater share of subscription revenue from a growing market.
The massive investments in streaming from the media companies are paying off in subscriber growth, which is great for their investors, but it could be even better for Roku and Amazon.