Streaming Media Numbers
The WSJ published an article that got a bit of attention that included some estimates of subscribers of streaming services in the US. This was the first time we caught a glimpse of an estimate of Apple TV+ user number. The chart in the article ranked the services user base like this:
Amazon Prime: 42.2
Apple TV+: 33.6
While I always take these estimates with a grain of salt, particularly when they come from a firm looking for marketing exposure, they do seem within the ballpark from other estimates I’ve seen from investment banks, particularly the Netflix number and Hulu number.
If the Amazon number is correct in the ballpark, then it suggests half of US Amazon Prime members are using Prime Video. The Apple TV+ number is a fascinating one because we know a good portion of those are people using their free year of access when they purchased new hardware. A big question many of us had when Apple launched this promotion was what the conversion rate would be given it was free for a year. This seems a reasonable test for the strength of the service that if a good portion of the ~100m people who would buy new hardware from Apple in the Dec and March quarter convert then it would suggest TV+ is compelling, however, if very few converts even if free it is not a good sign.
I initially thought the AppleTV+ number sounded a bit high, but I believe the 30% conversion is the correct number to assume. Benjamin Mayo, via Twitter, from 9to5Mac, had some sound logic to challenge the 33.6m number.
Hopefully, Apple will give us some potential reads on AppleTV+, and other services during the earnings call (but I doubt it). Until then, many will be trying to figure out the subscriber numbers for their services.
Obviously Disney+ is the one that, while lowest, has the most weight. Right off the bat if Disney+ has more than 20m subscribers, it is already ramping faster than Disney’s initial estimate of 25-30m subs by end of 2020. This is not shocking honestly as it seems to reach high US household penetration of Disney+ is a safe assumption. The only limiter, in my opinion, is how many potential customers have access to the Disney+ app on their big screen. The other weight Disney will have is their majority stake in Hulu. Disney will have opportunities to bundle Hulu, ESPN+, and Disney+ at some point this year and could very well accelerate the take of those services.
This space is fun to watch because we are seeing the groundswell of disruption for traditional TV which includes tremendous competition now that has the old guard of networks like CBS, NBC, Fox, etc., being forced to think and compete in new ways which are great for entertainment.
Intel reported strong earnings on the back of the data center business. More importantly, from a confidence perspective, they guided to a positive number for the first quarter of 2020. What is mostly positive, from a business perspective for Intel, is the growth in cloud/data center was healthy enough to cover the losses from their CPU shortages. Intel remains one of my stocks to watch in 2020 as I do see some positives for them overall in 2020 and the upcoming battle with Nvidia on GPU will be truly fascinating to watch.
That being said, this year will still hold some bumps for Intel. There is a concern, on the cloud front, that we see a slow down in the data center. Part of that concern is this being an election year in the US, and historically business pull back investments and heavy spending decreases. There is already a concern Intel’s CPU shortages continue and couple that with a slowdown in data center growth and you have the rocky 2020 I spoke about.
Granted, in this modern age and competition increasing, companies may not hold their historical pattern of spending more conservatively in election years, but the possibility remains.
Semi Stock in 2020
The semiconductor industry, as a whole, continues to be one of the hottest sectors from many vantage points but from a stock perspective specifically. We are seeing a growth period for semiconductor stocks and all the top names, Intel, Nvidia, AMD, Qualcomm, etc., are seeing growing confidence in their growth story.
I’ve been bullish on the semiconductor industry for years since we are seeing a period of technological growth that rivals the industrial revolution as integrating technology into your business is now seen as an absolute must to compete. The upside addressable market for semiconductors still has tremendous growth ahead as more and more industries embrace technology fully and embed into nearly all their organizational processes.