The company that comes out on top in the streaming wars may not be Netflix or the other usual suspects, according to Needham’s Laura Martin. The analyst said investors should be “far more wary” of mega-cap tech giants Amazon and Apple , which are a “growing threat to streaming incumbents,” as they leverage their considerable businesses to build up their video platforms. “AAPL and AMZN are winners of the Streaming Wars (our view) because they have virtually unlimited resources, best-in-class Walled Garden 1st party data, and top-notch tech teams,” Martin wrote in a Monday note. Martin expects the two tech companies will edge out their rivals as they expand into global digital advertising and start ramping up bids for live sports rights. Global digital advertising, which represents a total addressable market of $650 billion annually, would generate more revenue for the companies. Amazon already has about $35 billion in advertising revenue, while Apple is in the process of building its advertising platform. Over the past two years, large advertisers increasingly shifted dollars to streaming video, as the number of households with smart TVs installed jumped during the pandemic, the note read. Meanwhile, Apple and Amazon’s entry into the bidding wars for live sports coverage is a threat to all streaming services that are attempting to attract the increasingly fractured consumer attention. They’re competing alongside video games and consumer-generated content platforms such as TikTok. Breakthrough “hit” contact that can reaggregate “large audiences increases in value for advertisers as it becomes increasingly rare,” Martin wrote. “Just a few sports, movies or TV franchises have the ability to reaggregate mass audiences. These content assets become more valuable over time.” Martin believes Apple, Amazon, Disney, YouTube, Roku and Vizio will emerge as streaming wars winners, while pure play streaming companies that do not have other assets to offset losses are “at a structural disadvantage.” Still, “losing the Streaming Wars may be a winning strategy” for some companies with deep content libraries, Martin said. “We expect consolidation to drive upside to film and TV-series library values for the next 5 years, and smaller (under $50B market cap) companies that own hit content IP to be take-over targets,” Martin wrote. “Evidence includes Disney’s acquisition of the Fox library, DISCA buying Warner Media, and AMZN buying MGM. We believe NFLX choosing Microsoft as its SSP, which makes no sense to anyone in AdTech, is a strategic first step toward NFLX trying to sell itself to MSFT,” Martin added. Martin expects Paramount could benefit from streaming consolidation. —CNBC’s Michael Bloom contributed to this report.
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