Nielsen’s Eye-Opening Numbers
Amazon Prime has emerged as a formidable contender in the on-demand streaming space, surpassing the popularity of all of Disney’s streaming brands, including Disney+ and Hulu. According to data from TV ratings agency Nielsen, Amazon Prime has consistently captured more total view-time in the United States than Disney+.
In October, Amazon Prime’s total domestic watch-time exceeded Hulu’s time-share of domestic television sets. Although both services experienced a decline in November, Hulu’s loss was significantly greater. Hulu’s share of total U.S. television viewing time dropped to its lowest level since early 2021, hovering around 2%. On the other hand, Disney+ has managed to maintain a steady viewership of around 2%.
Amazon Prime’s Advantages
While it may seem like an uneven comparison, Amazon Prime holds certain advantages over its competitors. Estimates suggest that there are approximately 160 million Prime subscribers in the U.S. alone, giving it a larger audience reach. Additionally, Prime offers a wider content library, sourcing content from multiple providers and having the financial means to secure exclusive programming.
Furthermore, Prime’s popularity is not solely attributed to its video streaming service. Many subscribers emphasize the free shipping perk offered by Prime on Amazon.com purchases as a primary reason for their subscription.
Good News for Amazon
The data from Nielsen is promising for Amazon. Despite being primarily known for e-commerce and cloud computing, Amazon Prime remains a favorite among U.S. consumers. According to market research firm Digital Commerce 360, the free shipping perk is the second most significant reason why people shop with Amazon, next to its extensive selection.
Moreover, this shift in viewing time highlights the potential of Amazon’s evolving advertising business model. Amazon.com’s web traffic has become a platform for generating advertising revenue, with the company generating over $12 billion in ad business last quarter alone. As Prime membership grows, this aspect of Amazon’s business could exceed investors’ expectations.
Bad News for Walt Disney
For Walt Disney, the lackluster interest in Disney+ and the declining viewership of Hulu is cause for concern. Despite Disney’s reputation as a media and entertainment powerhouse, its streaming services have not met expectations. While it made significant strides in attracting streaming customers, the direct-to-consumer division continues to operate at a loss, with over $400 million lost in the last quarter.
In an effort to turn things around, Disney has implemented cost-cutting measures, aiming to reduce annual expenses by $5.5 billion. However, reducing spending on content poses challenges. Customer growth for Disney+ and Hulu in the U.S. has slowed down, and projections indicate a complete halt in growth by 2023. The international streaming brands are facing a similar decline.
Streaming accounts for a significant portion of Disney’s revenue, but its profit margin rates pale in comparison to other divisions such as cable television, sports, and theme parks. The number of paying streaming customers has stagnated, further exacerbating the profitability issue.
While the growing popularity of Amazon Prime’s perks may not be a game-changer for Amazon investors, Nielsen’s numbers are indicative of broader trends. They reinforce the argument against holding Disney shares and strengthen the bullish thesis for Amazon as a whole. The streaming market continues to evolve, and Amazon is successfully navigating the landscape, while Disney faces challenges in turning its streaming ventures into profitable ventures.