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COMMENTARY

Netflix's dizzying valuation faces biggest test yet

NETFLIX is the reigning media stock in the S&P 500 Index, but it's going to be tough holding on to that spot.

This will be the year the company's steep valuation will be put to the test.

Since Netflix introduced an online service in 2007, it has operated without any true competitors. That dynamic will change drastically in just a few months when Walt Disney Co, AT&T Inc and Apple Inc begin to roll out their own Netflix-like products. Last week, Apple showcased its re-imagined Apple TV app and a soon-to-come Apple TV+ subscription video service. On April 11, Disney will give a sneak peek at Disney+ during a presentation for investors. AT&T has yet to give a preview of its offering, though it has said there will be multiple subscription options.

There are reasons for Netflix to fear all three companies. Disney faces the biggest challenge in deciding how to redirect its content to Disney+, as the shift threatens to hurt the company's other revenue streams. That said, if anyone is going to get a new product right, it's Disney. Years ago the company began quietly studying the streaming opportunity and tested its ambitions with a little-known service called DisneyLife. Now, it is carefully considering the combination of price and content for Disney+, an app that could be a must-have for many parents. Disney doesn't do things half-way - the magic of its theme parks is a testament to that.

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AT&T, for its part, is grappling with a substantial debt burden, a reorganisation of its freshly acquired WarnerMedia businesses and a scandal that saw its top movie studio executive leave abruptly. But of all the companies entering the streaming fray, AT&T is sitting on perhaps the best assets. The US$102 billion takeover of Time Warner last year gave it control of HBO, the Turner Networks and Warner Bros. studio. If there was any question about HBO's continuing power to draw viewers, just witness the hype around the final season of Game of Thrones, which premieres later this month.

Apple's push into TV isn't new. As my colleague Shira Ovide noted last week, there already existed an Apple "TV" hub for watching movies and shows from various content providers, but many iPhone owners weren't aware of it. Even so, as more cable customers cut the cord and switch to streaming, Apple's draw is its ecosystem across devices.

It's not the first time these Netflix fears have arisen. In fact, looking back on news coverage from January 2007, when Netflix transitioned to streaming, there was much made of the threat of Apple TV and similar services - and of course, Netflix trounced them all.

But get ready, Netflix shareholders, because this time the others are bringing the heat. BLOOMBERG