Posted in: Market NewsOp-ed
Published:
May 7, 2020 1:51 PM UTC

Shockingly Bad Unemployment News Is Great News for Disney+ and Netflix

As more people huddle at home due to coronavirus, Netflix and Disney+ are in a strong position to reap the rewards.
  • The U.S. unemployment rate is expected to rise dramatically with the release of April’s job report.
  • Tight budgets will force Americans to turn more towards affordable at-home entertainment options such as streaming services.
  • Netflix, Disney+ and other streaming services are some of the likely beneficiaries.

The coronavirus pandemic has caused massive job losses, with unemployment set to surge to double-digit levels.

Economists surveyed by Dow Jones expect a loss of 21.5 million jobs in April, pushing the unemployment rate to 16%.

Source: Twitter

The devastating job losses will be good news for streaming services, though. The two market leaders in terms of overall subscribers–Disney+, and Netflix–have the most to gain.

Why high unemployment will boost online streaming services

During the Great Recession, when the unemployment rate peaked at 10% in October 2009, a trend towards at-home entertainment was evident with Americans dedicating more time to watching TV.

Weekly hours spent watching TV rose in 2009, according to Deloitte. At the time, over 33% of Americans ranked watching TV as their favorite media activity–a sharp increase from the year prior when the economic downturn was relatively less severe.

During the last financial crisis, online video streaming wasn’t anywhere near its current popularity levels. By September 2019, 74% of U.S. households had a video streaming service.

Source: Twitter

Record high unemployment will likely translate into more profound subscriber growth for the major streaming services.

The most affordable form of home entertainment?

But won’t subscription fees deter people who’ve lost their livelihoods or had their incomes cut substantially? The experience with pay television during the Great Recession suggests otherwise.

According to Jessica Insalaco, former VP of Dish Network, people were looking for entertainment during the last major recession:

People really value their TV subscriptions as their primary form of entertainment. We’re seeing more and more people looking for deals, looking for ways to save money. … This is one thing that people hold on to, even though they may cut down pieces of it.

Cost-cutting measures by U.S. households didn’t impact pay-TV in 2009. | Source: Ad Age

Additionally, the subscription fees are arguably cheaper than other forms of entertainment. With monthly subscription fees as low as $7, streaming services are more affordable than eating out, going to a movie theater, attending a concert, and so on.

Are Netflix and Disney+ recession-proof?

If the stock market is anything to go by, streaming services will weather the economic downturn even after the coronavirus pandemic is over.

Netflix (NASDAQ:NFLX), for instance, has outperformed the broader stock market. Since the year started, Netflix is up 33% while the S&P 500 is down by around 11% over the same period.

Netflix surged to a new all-time high in April. | Source: TradingView

There’s no doubt that Disney+ would be doing equally well if it was a standalone stock separate from its parent company Walt Disney (NYSE: DIS). The House of Mouse’s other business units (cruise lines, theme parks) have been battered by the coronavirus pandemic.

Disclaimer: The opinions expressed in this article reflect the author’s opinion and should not be considered investment advice from CCN.com.

This article was edited by Sam Bourgi.

Mark Emem @wetalkmarkets

I cover business and the stock market for CCN. Currently based out of Nairobi, Kenya. Feel free to get in touch with me. Email: wetalkmarkets[at]yahoo.com

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