Macron’s view of the world

Emmanuel Macron on Europe’s fragile place in a hostile world

In a blunt interview the French president laid out his thoughts on NATO, America and the future of the EU

WHEN EMMANUEL MACRON stepped from his presidential plane onto the red carpet at the airport in Shanghai on November 4th, two flags were fluttering in the warm air: one Chinese, the other the French tricolore. This was only to be expected for a visiting French president, whom President Xi Jinping treated to two banquets and a private dinner, in two different cities.

Yet the absence of a European Union flag was a small visual reminder of the scale of the diplomatic challenge Mr Macron has set himself. For the French president went to China this week not just to speak for France, but for Europe.

Mr Macron’s message was carefully calibrated. When Germany’s Chancellor Angela Merkel jetted off to China in September, she took with her a large delegation of German chief executives. Mr Macron also flew French businessmen with him to China, and pushed hard for better access to Chinese markets for French stuff. To make the point, Mr Macron and Mr Xi tasted high-end Bordeaux and morsels of French beef together at the Shanghai trade fair.

Yet the French president also went “to show that Europe has a unified face”. He brought with him an Irish European commissioner and a German minister, and included a clutch of German business bosses in the French delegation. In a speech on trade, Mr Macron framed the stakes as European, and scarcely mentioned la France. With China ready to exploit the slightest European division, Mr Macron hoped to show that a common, strategic, pan-European policy might be possible.

Shaking hands, shaping time

Shortly before his China trip, Mr Macron laid out this vision of a more “strategic” and “sovereign” Europe in a candid interview with The Economist. The conversation took place late in the evening on October 21st at the Elysée Palace in the president’s gilt-decorated office, the salon doré, where Charles de Gaulle used to work. In the interview, Mr Macron is as bleak about the perils facing the continent as he is radical about his prescriptions.

“Look at what is happening in the world. Things that were unthinkable five years ago,” the French president declares. “To be wearing ourselves out over Brexit, to have Europe finding it so difficult to move forward, to have an American ally turning its back on us so quickly on strategic issues; nobody would have believed this possible.” Europe is on “the edge of a precipice”, he says. “If we don’t wake up…there’s a considerable risk that in the long run we will disappear geopolitically, or at least that we will no longer be in control of our destiny. I believe that very deeply.”

Since the 1990s, says Mr Macron, the European Union has progressively lost its political purpose. Its focus on market expansion and regulation, underpinned by the American defence guarantee, provided an illusion of eternal stability. America’s gradual retreat from Europe and the Middle East, which he dates to before the election of President Donald Trump, combined with its new protectionism, has exposed Europe’s vulnerability.

“But we find ourselves for the first time with an American president who doesn’t share our idea of the European project,” Mr Macron notes, and whose attitude to the risk of jihadist prisoners on the loose in Syria is that they will “be escaping to Europe”. When Mr Trump tells the French president that “it’s your neighbourhood, not mine”, says Mr Macron, what he is really saying is: “Wake up!” With America turning its back, China rising, and authoritarian leaders on the EU’s doorstep, the result is “the exceptional fragility of Europe”, Mr Macron concludes, “which, if it can’t think of itself as a global power, will disappear.”

“What we are currently experiencing,” he declares, with reference to the withdrawal of troops from Syria, is “the brain-death of NATO”. Pressed to explain, he argues: “You have no co-ordination whatsoever of strategic decision-making between the United States and its NATO allies. None. You have an unco-ordinated aggressive action by another NATO ally, Turkey, in an area where our interests are at stake.” Did this mean that Article Five—the idea that if one NATO member were attacked the others would come to its aid, which underpins the alliance’s deterrence—is still functional? “I don’t know,” he replies. “But what will Article Five mean tomorrow?”

The underlying message is brutal: Europe has to stop judging these times a historical anomaly, start asking whether NATO is fit for purpose, and get its act together. This is a view broadly shared by his countrymen (see chart 1). “Even if we don’t want to hear it,” he says, “we cannot in all responsibility fail to draw the conclusions, or at least begin to think about them.”

His business is philosophy

Mr Macron, a philosophy graduate as well as a former investment banker, is considered to be more of a thinker than most world leaders. He tries to read for an hour or two each day. In Shanghai he slipped off for a private lunch with Chinese artists to muse about freedom. Mr Macron’s deliberations have led him to conclude that what is needed is “European sovereignty”: the collective ability to defend Europe’s interests—over security, privacy, artificial intelligence, data, the environment, industry, trade and so forth—in a strategic way.

During his interview, Mr Macron roams across topics, moving from a psychological portrait of Vladimir Putin one moment to the perils of a low-interest-rate economy the next. Europe faces an almost-existential moment, he argues, as the world shifts from a global order based on rules to one determined by muscular power politics. Yet he does not seem to be daunted. He has a more engaging manner than his aloof public persona, which has led to a reputation for haughtiness, would suggest.

Moments such as when Mr Macron told off a teenager for not calling him “Monsieur” in 2018, or when he said in 2017 that railway stations were places where “one crosses people who succeed, and people who are nothing”, have added to this impression that he is arrogant and removed. And, indeed, the bleakness of Mr Macron’s analysis is matched by an uncanny—and no doubt excessive—confidence in his own ability to do something about it.

But can he? French Fifth-Republic presidents are fond of laying out sweeping visions of the world that appeal to the country’s grandeur. Over the years, when French leaders have called for a Europe puissance (European power), this has often sounded suspiciously like code for French hegemonic ambitions. Such efforts in the past have been dismissed in London or Washington as quaint, or dangerously undermining of NATO, or both. In 2003 during the Iraq war, when France, Germany, Belgium and Luxembourg held talks on such matters, their get-together was dismissed as a second-rate “chocolate summit”.

Yet there are new reasons to try to understand the thinking in Paris. Mr Macron is an energetic diplomat, keen to shape the events he sees unfolding. For at least the next year, and possibly beyond, he will be the only ambitious leader of a liberal democracy who is also at the head of a nuclear power, with a military presence that reaches from Europe to the Pacific, a UN Security Council seat, strong executive powers and a robust parliamentary majority. Compare this with the agonies of Brexit Britain, Germany’s dysfunctional coalition and faltering economy, or the political paralysis of Italy and Spain.

The result could be that leadership in Europe could pivot to France. By default as well as inclination, says Benjamin Haddad of the Atlantic Council in Washington, DC, Mr Macron is well placed to become Europe’s new diplomatic leader.

For sure, Mr Macron cannot compete with Mrs Merkel on experience. But, midway through his term, the 41-year-old French president has built up ties to many world leaders. Since taking office, Mr Macron has made 101 trips to over 50 different countries, including places (from Nigeria to India) outside France’s traditional sphere.

His China trip was his second there as president. On his watch, Mr Trump has been four times to France. Even Mr Macron’s domestic standing has started to recover, having taken a bruising soon after coming into office. After the searing social unrest led by the gilets jaunes (yellow jackets) a year ago, his approval rating—still very low, at 34%—is at least back up to where it was before the protests began. (Mr Trump’s is at 41% and over the past three years has not slipped below 36%.)

Moreover, despite some clumsy footwork, Mr Macron has manoeuvred a number of France-friendly appointees into top EU jobs. They include Ursula von der Leyen, the new head of the European Commission; Charles Michel, the incoming European Council president; and Christine Lagarde, who now runs the ECB. And France has secured a hefty new commission portfolio spanning the single market, industrial policy, digital, defence and space—although he failed to secure Sylvie Goulard for the job, after she became the first French candidate to be rejected by MEPs in Brussels for being unfit to take office.

Some of the language in Europe has started to shift in Mr Macron’s direction, at least. Mrs von der Leyen says she wants to run a “geopolitical” commission. Mark Rutte, the Dutch prime minister, has argued that “the EU needs a reality check; power is not a dirty word.” Mrs Merkel has told Europeans that, when it comes to their collective security, “the times when we could rely on others are over.”

Flown east of the sun

By the third day of his trip, French officials were pleased that a deal to protect regional European food labels—such as Roquefort blue cheese—in China, and vice versa, had been signed and that China seemed supportive on climate change. But they were also candid about how difficult it all is.

China is a good test of whether Mr Macron can get Europe to speak as one voice, and whether Europe wants that voice to be Mr Macron’s. He has been outspoken about “China’s real diplomatic genius for playing on our divisions and weakening us”. He says he wants fellow Europeans to be less naive; he has argued it was “stupid” to sell essential infrastructure in southern Europe to the Chinese. He also wants the EU to insist on reciprocity in trade and market access, and to guard against technology transfer. To back this up with a show of limited muscle, France sails at least twice a year through the South China Sea.

The need for a credible common policy sounds sensible. Trying to forge one is a lot more difficult. Take the construction in Europe of 5G telecoms networks. “You have to grasp the sensitivity of what we’re talking about,” Mr Macron argues, the pitch of his voice rising. Europe, he laments, has focused its technology policy almost exclusively on market issues, such as roaming or competition, at the expense of strategic thinking.

He thinks Europeans should be worried that they cannot guarantee that sensitive technology will be neither Chinese nor American. France is taking a cautious approach to screening investment in its 5G network roll-out. Despite a warning from the head of its own foreign-intelligence service, Germany has taken a less restrictive approach.

In some matters, the EU may become more willing to act in what Mr Macron considers to be a strategic fashion. The new European Commission could be more sympathetic to French desires to apply a global measure of market power to evaluate industrial mergers, which would enable pan-European champions to emerge.

The idea of a sales tax on tech firms, which France introduced in July, prompting Mr Trump to tweet angrily about “Macron’s foolishness”, is gaining ground in other countries. France has persuaded Germany to consider the idea of a European carbon border tax.

We live in an unsettled time

The really tough part of Mr Macron’s vision, however, would involve a step change for Europe that is extremely difficult to see happening in a hurry. It would mean converting a bloc that uses the heft of its market to apply rules and standards—and deploys its defence capability primarily for the purposes of crisis management—into one that can project power and act collectively as a military force. “It is very tough,” Mr Macron concedes, acknowledging that “Europe hasn’t demonstrated its credibility yet.” But, he insists, “we’re making progress” and that “attitudes are changing.”

The French president cites his pet project, the European Intervention Initiative, a coalition of countries (including Britain), ready to act together in crises, as well as the German-favoured EU defence co-operation agreement, known as PESCO. He also points to the hefty new €13bn ($14bn) European Defence Fund to finance research and equipment, and a Franco-German agreement for a joint future-generation tank and fighter plane. All of these, Mr Macron insists, are “designed to be complementary to NATO”. France knows full well from its counter-terrorism operations in the Sahel the depth of its reliance on America.

But is Europe really ready to undertake such a transformation? “I’ve been hearing about European strategic autonomy for so long,” sighs Philip Gordon of the Council on Foreign Relations, and formerly an adviser to Barack Obama. Part of the problem is defence spending (see chart 2). If Europe’s NATO members are to meet their commitment to spend 2% of GDP on defence by 2024, this would mean spending an extra $102bn—some 40% more than they currently do.

Tougher still is the need for a change of mindset. Germany remains a defender of the status quo. This is the case on budgetary orthodoxy, which Mr Macron has failed to influence, as well as the post-cold-war order, where he detects some change. Germany is “very unambitious on the world scene, and so a very difficult partner for France,” says Claudia Major, of the German Institute for International and Security Affairs, a think-tank. “We constantly feel that [the French] want something from us, and that this is so annoying.”

Germany is not alone. In other European capitals there is unease at the prospect of French leadership, and a feeling that Mr Macron is all for co-operation, as long as it is on French terms. Such misgivings were exposed by his recent veto over the start of accession talks with North Macedonia and Albania. Fellow Europeans roundly condemned this as exactly the sort of failure of geostrategic thinking that Mr Macron accuses others of.

This view infuriates the president. Enlargement without reform of the EU and of its accession rules, he says, is “absurd”. It prevents Europe from acting as a more integrated bloc. “Half” of the other EU countries agree with him on Albania, he claims, but hide behind France. And he rejects the idea that his veto leaves them vulnerable to rival powers, pointing to growing Russian and Chinese influence in Serbia, which is an accession candidate. If Europe reformed first, says Mr Macron, he would be “ready to open negotiations”. 

Or consider Mr Macron’s Russia policy. He has long argued that rogue powers are more dangerous when isolated. To this end, he has hosted Vladimir Putin at both Versailles, near Paris, and Brégançon, on the Mediterranean. But his call for a “rapprochement” with Russia, in order to keep it out of China’s arms, has alarmed Poland and the Baltics. “My idea is not in the least naive,” argues Mr Macron.

He insists that any movement would be conditional on respect for the Minsk peace accords in Ukraine. He has not called for sanctions to be lifted. And he sees this as a long-term strategy, that “might take ten years”. Mr Macron’s belief is that, eventually, Europe will need to try to find common ground with its near neighbour. Not doing so would be “a huge mistake”.

History holds her breath

The rest of the world is still not quite sure what to make of the French president. There is a dizzying amount of diplomatic activity now coming out of Paris. This has already led to false hopes, such as the prospect of a Macron-brokered meeting between the Iranians and Americans. Promises of four-way talks between Russia, Ukraine, France and Germany this autumn have yet to materialise. Not unlike Mr Macron’s global showmanship and his theatrical handshakes with other world leaders, his foreign policy is generating both interest and disquiet in almost equal measure.

It may be that despite all this energetic effort, Mr Macron’s ambitions for “European sovereignty” are frustrated from within by a combination of European divisions, Brexit, German inertia and lingering suspicions of the French. Or that his imperious behaviour curtails his influence. “Macron has everything in place to build a French-focused Europe,” says Ulrich Speck, of the German Marshall Fund. “Strategically he’s right about so much, but operationally he doesn’t work enough with other partners.” Nor is it even clear that Europe needs to fill its leadership gap.

Yet, as Mr Macron displayed in China this week, he will seize the mantle if he can. The French president may overpromise and underdeliver. But he is unfazed by those who accuse him of being pushy or difficult, judging this to be the inevitable result of trying to upend the rules.

“I’m trying to understand the world as it is, I’m not lecturing anyone. I may be wrong,” he insists, in a tone that hints he does not believe it for a second. The leader who describes such a bleak outlook for Europe is going to try to do something about it, whether others like it or not.

As one of his advisers puts it, Mr Macron “is a realist, and a pragmatist, and he exposes himself by taking risks. But that’s how he is. That’s how he became president.”

The fool’s gold of emerging market valuations

By: Guest post

Lawrence Hamtil is an investment advisor at Fortune Financial Advisors in Overland Park, KS. He writes frequently about investing topics on the firm’s blog. His research and commentary have been cited in several major financial publications. The information provided in this publication is for general information only, and is not intended to provide specific recommendations.

For many years now, the value investors at Grantham, Mayo, and van Otterloo (also known as GMO) have been bullish on emerging market equities.

Jeremy Grantham, the firm’s chief investment strategist, famously suggested that a hypothetical fund manager for Joseph Stalin would stand his best chance of not being shot for poor results by investing substantial capital in EM.

“Be as brave as you can on the EM front,” he said. “Be willing to cash in some career risk units. Bravery counts for so much more when there are very few good or even decent alternatives.”

Last week, GMO again made its case for EM, with Rick Friedman from the Asset Allocation team arguing that EM equities are as appealing as ever, given they are as cheap as they have been since the heady days of the tech bubble:

Certainly, if one were to take only the index-level valuations, EM, as measured by MSCI, would look like a steal. EM trades at just under 12 times next year’s earnings as of September, versus more than 17 times for the US

Yet take a look beneath the surface of index-level data and you could argue that emerging market stocks are hardly the bargain that they seem to be.

To start, let’s break down the EM index into various sectors. On this basis, EM often trades on a par with, and in some cases even at a premium to, its US counterparts. To this point, here’s a table of the valuations of the various sectors on both forward and trailing earnings:

It’s clear from these data that the bulk of the EM discount resides in a few sectors which are generally associated with domestic revenue streams, such as banks and utilities, and in energy and materials, which are often dominated in their markets by state-owned enterprises.

However, even then, the sector-level data mask serious differences between the businesses in each sector. For example, materials in the US is dominated by chemicals firms, while mining dominates the EM materials sector. It makes sense, then, to look at some industry-level data to see where these valuation discounts are.

Indeed, if you look at what one might characterise as the more globalised industries like software, beverages, and automobiles, there are actually very few valuation differences between the US and EM:

In contrast, within the more domestically-reliant industries like banks and utilities, there are significant valuation differences between the US and EM:

It is likely, then, that any strategy that focuses on the cheapest stocks in the EM universe would be heavily based on this latter group. That is certainly the case for MSCI’s EM Value index, where financial, energy, and materials stocks currently combine to make up just under 60 per cent of the index.

GMO also cites a favourable cyclically-adjusted price-to-earnings rate (CAPE) to make its case for EM. As Mr. Friedman notes in his article, EM CAPE is at 15 times versus a lofty 29 times in the US

It is true that the CAPE ratio has certainly been a reliable tool for forecasting real equity returns in both the US and EM, but, as Joachim Klement of Fidante Partners observed in 2012: “[I]t is clear that emerging market stocks can only outperform developed market stocks if their respective currencies continue to appreciate versus the US Dollar or other developed market currencies.”

For a US investor, this is a critical point; over the decades since MSCI’s EM index began in June of 1988, excess returns for EM relative to the US have coincided with significant dollar weakness:

As you can see from the chart, the great EM bull market (relative to US stocks) of the 2000s coincided with a substantial bear market in the dollar, and its end coincided with the resurgence of the greenback circa late 2011.

Mr. Friedman does acknowledge the dependence of excess EM equity performance on USD weakness, but suggests EM currencies are currently positioned favourably to the dollar, which GMO believes is due for a period of weakness on a relative basis.

I’m no expert in currency valuation, so I am agnostic on this point, but it seems a rather tall order to have one’s equity bets so reliant on something as fickle as the currency market.

The final argument Mr Friedman and his colleagues make is that because of their cheaper valuations, EM equities are poised to hold up better than expensive US stocks, just as they appear to have done in the aftermath of the tech bubble (in their analysis, GMO measures performance over the four years ending in January 2004):

As I have argued before, this particular period of index returns had more to do with the excessive tech weighting in the S&P 500 index at as the bubble popped, as well as a decline in the dollar, than it had to do with EM being cheap.

For example, over the same period cited by GMO in the chart above, while both MSCI EM and MSCI EM Value did outperform their respective MSCI USA counterparts, EM tech performed almost as poorly as US tech, just as US energy performed well, though it did lag its EM counterpart.

Perhaps most tellingly, over this period the equal-weighted version of the MSCI USA index outperformed the equal-weighted EM index, which suggests the excess performance cited by GMO was due to imbalances in sector composition (a lot of tech and little energy in the US versus little tech and a lot of energy in EM). EM energy, of course, benefits from a weaker dollar as energy stocks, particularly with the tailwind of rising oil prices, trade inversely to the dollar:

To conclude, it is difficult to share GMO’s enthusiasm for emerging markets.

In addition to not being as cheap as they appear, the majority of EM markets are overly concentrated in financial stocks, and they are subject to large drawdowns due to political and fiscal instability, among other things.

It is even debatable whether EM stocks, using the generic MSCI EM Index as a proxy, add any material value to diversified portfolios, as I have argued previously.

GMO’s EM trade may end up working out very well for them and their clients but, in my opinion, the thesis requires too many external factors to work to make it worth the risk.

How to Get Past the US-China Trade War

China and the United States, like all other countries, should be able to maintain their own economic model. But international trade rules should prohibit national governments from adopting “beggar-thy-neighbor” policies that provide domestic benefits only by imposing costs on trade partners.

Dani Rodrik

rodrik166_STRAFP via Getty Images_chinatradeshippingboat

CAMBRIDGE – China’s economic rise poses significant political and strategic challenges to the existing global order. The emergence of a new superpower in Asia has inevitably produced geopolitical tensions that some have warned may eventually result in military conflict. Even absent war, the hardening of China’s political regime, amid credible allegations of myriad human-rights abuses, raises difficult questions for the West.

Then there is the economics. China has become the world’s top trader, and its increasingly sophisticated manufacturing exports dominate global markets. While China’s international economic role is unlikely to be insulated from political conflict, it is also inconceivable that the West will stop trading with China.

But what kind of rules should apply to trade between countries with such different economic and political systems? I recently teamed up with Jeffrey Lehman, Vice Chancellor of New York University’s Shanghai campus, and Yao Yang, Dean of the National School of Development at Peking University, to convene a working group of economists and legal scholars that could devise some answers. Our working group recently issued a joint statement, with support from 34 additional scholars, including five Nobel laureate economists.

China’s admission to the World Trade Organization in 2001, and the establishment of the WTO itself, was predicated on the implicit premise that national economies, including China’s, would converge to a broadly similar model, enabling significant (or “deep”) economic integration. China’s unorthodox economic regime – characterized by opaque government intervention, industrial policies, and a continuing role for state-owned enterprises (SOEs) alongside markets – has been very successful in spurring GDP growth and reducing poverty. But it makes deep economic integration with the West impossible.

An alternative perspective gaining ground in the United States is that the American economy should decouple from the Chinese economy. This would entail high trade barriers to Chinese exports and severe restrictions on bilateral investment flows. Such an approach would further intensify and render permanent US President Donald Trump’s trade war.

We propose a middle ground between convergence and decoupling. The key is that China and the US, like all other countries, should be able to maintain their own economic model. Trade and other policies aimed at safeguarding (or “protecting”) a country’s economic system should be presumed legitimate. What is not acceptable are policies that would impose one country’s rules on another (through trade wars or other pressure) or that provide domestic benefits only by imposing costs on trade partners.

Targeting the latter category, which economists call “beggar-thy-neighbor” (BTN) policies, is central to our approach. We argue that international trade rules should draw a bold red line around BTN policies and prohibit them. A typical example is trade restrictions that enable a country to exercise monopoly power globally, as China tried to do by restricting exports of rare earth minerals some years back.

Another example, which may become increasingly relevant in digital technologies, is closure of domestic markets to foreign investors in order to obtain competitive scale benefits on world markets. A third example is persistently undervalued currencies that help sustain large macroeconomic imbalances (trade surpluses).

Under this approach, many other policies that the US habitually complains about would not be considered objectionable. China’s industrial subsidies and SOEs, for example, would be considered a domestic matter. While they may hurt specific American firms and investors, such practices are not, in general, of a BTN nature: either they benefit the rest of the world in aggregate (as with subsidies), or their economic costs, where they exist, are borne primarily at home (as with state ownership).

By the same token, the US would be free to adopt trade and investment policies that safeguard the integrity of its technological systems and protect communities adversely affected by imports. It could also insulate itself from any negative spillovers from Chinese policies, if it chose to do so, by imposing restrictions at the border. China must recognize that policy autonomy is a two-way street: other countries need it as much as China does.

While our approach is stated in bilateral, US-China terms, it is easy to embed it in a multilateral framework – and even the WTO itself, with some creative legal maneuvering. One such approach is suggested by one of our working group members, Robert Staiger. The stark reality, however, is that progress on the multilateral front is unlikely without a prior agreement between the world’s two largest economies. Thus, we view our statement as an initial step in that direction.

Like all international agreements, our proposed approach depends on the willingness of the parties to abide by the terms. While the concept of BTN may be clear to economists as an analytical matter, we are not so naive as to suppose that the US and China would quickly and easily agree in practice on what is and is not a BTN policy. Disputes about terms and definitions will persist. Even so, our hope is that a framework that sets out clear expectations, respects both countries’ economic sovereignty, guards against the worst trade abuses, and allows the bulk of the gains from trade to be reaped would create the incentives needed to build mutual trust over time.

This approach leaves open the question of how the US and other Western countries should respond to China’s political repression or human rights abuses. That is not because these issues are unimportant, but because clear rules of conduct in economic relations must be established regardless of how even bigger conflicts are to be resolved. Without such a roadmap, it is not just the economic interests of China and the US that will suffer. The rest of the world will pay a high price as well.

Dani Rodrik, Professor of International Political Economy at Harvard University’s John F. Kennedy School of Government, is the author of Straight Talk on Trade: Ideas for a Sane World Economy.

The Great Streaming Battle Is Here. No One Is Safe.

Netflix, the current heavyweight, is in for a fight as Disney, Apple, AT&T and Comcast enter the ring this year and next

By Amol Sharma and Joe Flint

A new era is dawning in the entertainment world and you’re about to get a whole lot more choices—for better or worse. The streaming wars are here.

Titans of media and technology are wagering billions that consumers will pay them a monthly fee to stream TV and movies over the internet. Walt Disney Co. DIS 3.76%▲ is launching a $6.99-a-month service next week, following Apple Inc.’s entry earlier this month. AT&T Inc. T -0.10%▲ and Comcast Corp. CMCSA 1.10%▲ ’s NBCUniversal next year will mount their own challenges to streaming juggernaut Netflix Inc.

The combatants are fighting on the same battlefield, all seeking to lure in subscribers, but they have radically different motivations—and some have far more at stake than others.

Legacy giants like Disney and AT&T’s WarnerMedia are racing to reinvent their core media business, which is under assault as consumers turn away from traditional broadcast and cable TV. For them, selling streaming subscriptions to consumers has to work—and has to be profitable. For Apple, while streaming can advance its business, failure is an option.

Consumers will have choices to make as new entrants join the fray: Americans are willing to spend an average of $44 monthly on streaming video and subscribe to an average of 3.6 services, according to a survey of over 2,000 people in recent days by The Wall Street Journal and the Harris Poll. That is up roughly $14 from what most people pay now.

But with so many existing players already in the market—Netflix, Hulu, Amazon Prime Video, CBS All Access and ESPN+, among others—not everyone can emerge victorious. “This market is going to have to shake out -- it doesn’t feel like all these players can continue to play this game forever,” said David Wertheimer, a former president of digital products at Fox Networks Group who is now a media and tech investor.

Netflix is in an enviable position with a big head start, but may be in for some turbulence. Nearly one in three Netflix subscribers said they would likely cancel the service in the next three months to make room for a new entrant, according to the Journal-Harris Poll survey. Some 43% of parents with kids under 18 said they were likely to cancel, as did 44% of men ages 18 to 34.

Their stated intentions may not translate into an actual cancellation. There are currently 158 million Netflix subscribers globally.

Netflix, like any subscription business, has regular customer turnover, and some of those who cancel eventually return. “Like the competition, polls come and go,” a Netflix spokesman said. “But years of experience have taught us that consumers want control over when and how they watch—and a wide choice of quality stories across every genre. And that’s what we’ve always focused on providing.”

*Peacock has yet to provide pricing for its service and hasn't marketed it. †Respondents weren’t asked about interest in canceling Hulu or Amazon Prime.

Source: WSJ-Harris Poll survey of 2,018 adults conducted online Oct. 31 – Nov. 4.

Shots have already been fired, with Apple and Disney setting ultracompetitive prices and lavish spending by all parties to stock their services with the hottest programming, whether that is originals from a coveted producer or reruns of a 20-year-old TV classic. The explosion of options risks confusing consumers. Which service has the “The Office,” which has “Seinfeld” and which has “Friends”? How do you sign up?

“The next 18 months are going to be the most interesting in the history of the entertainment business—the grounds are shifting,” said Hollywood veteran Steve Mosko, chief executive of the production company Village Roadshow Entertainment, which is developing projects for multiple streaming outlets.

Franchises and Oldies

Disney surprised the media world with a low price for its Disney+ streaming service that is nearly half of Netflix’s most popular $12.99 monthly plan: Some 47% of survey respondents were likely to subscribe to Disney+. Many were especially enthusiastic about its big franchises—Star Wars and Marvel, for example—as well as its large catalog of children’s classics, from “Cinderella” to “Aladdin” to “Moana.” Disney acquired 21st Century Fox entertainment assets last year for $71.3 billion.

Disney is making a land grab for users now and worrying about profits later on—it expects to break even on the service in 2024. “They were brilliant thinking through the pricing. This is about aggregating consumers,” said analystMichael Nathanson.

Disney’s direct contact with its customer base has come mostly through theme parks, Mr. Nathanson said, and the streaming service will allow “a deeper set of connections.” Disney could market its consumer products, cruises or theme parks to streaming customers, some media executives said.

Walt Disney Co. is known for its hit movies and theme parks, like Walt Disney World in Orlando, Fla. But the company is looking to a new streaming service called Disney+ as a driver of future results. Photo: Ricardo Ramirez Buxeda/Zuma Press

A Disney spokeswoman declined to comment.

Hulu, which is now controlled by Disney, will become the home to more adult and edgier fare. Disney announced earlier this week that its FX Networks would also produce original shows for Hulu.

Comcast is taking a different path from its peers, reflecting its identity as not just a content owner, but as the country’s leading cable distributor. Peacock, the streaming service from its NBCUniversal unit, is set to launch next April, featuring a bevy of classics like “The Office,” “Frasier” and “Cheers,” plus originals from talent in NBC’s stable. An ad-supported version will be free to people who subscribe to Comcast’s cable TV or broadband services. If the company can reach deals with other cable providers, it could be free to their customers, too.

To some observers, that suggests Comcast wants to protect a traditional cable business that is still lucrative, even if cord-cutting is siphoning customers gradually. “The streaming business puts them in a conflicted place,” saidGary Newman,a former chairman of Fox’s television group. “It’s hard to be in on streaming without being fully in on streaming.”

People close to Comcast said the company is deeply committed to the streaming business and is simply taking a different approach.

Comcast is debating various ways to sell Peacock to those who can’t get it through a cable provider. One idea is to offer a limited, free version with ads meant to draw users in—it might not have various hit shows or might limit the number of episodes available, people familiar with Comcast’s deliberations said. A second tier would charge a modest subscription fee and would make all content available, with ads, while a third tier would charge a higher subscription fee with no ads, the people said.

NBC’s prime-time broadcast shows now stream on Hulu. At launch, Peacock will be able to share much of that content, and in September 2022 NBCUniversal will be able to terminate the deal and have most NBC shows exclusively on Peacock, if it chooses, people familiar with the agreement said.

AT&T will be the last of the major entertainment companies to enter the fight, with its HBO Max service slotted for a May 2020 launch. Its biggest challenge: It will be at the top of the market at $14.99 a month.

HBO is in the name, and the service has its entire current and past lineup. But the goal is to have something much broader, for just about everyone—cartoons, superhero movies from the DC franchise (Batman, Superman, Wonder Woman), “The Lord of the Rings” movies, and one of the largest and most popular catalogs of re-watchable TV shows, notably “Friends” and “The Big Bang Theory.”

Some 41% of survey respondents said they would be likely to subscribe. But brand and service confusion might be an issue. The company will encourage people to switch from HBO Now, a different service offering just HBO programming at the same cost, over to HBO Max.

The proliferation of streaming options risks confusing consumers who want to know which service has TV shows like “Friends.” That series now belongs to AT&T’s HBO Max service, which is scheduled to launch in May 2020. The couch featured in the opening of each ‘Friends” episode was on display for investors last month in Burbank, Calif. Photo: Getty Images for WarnerMedia

What about people who get HBO on TV? AT&T hopes to get them onto HBO Max by cutting deals with cable and satellite TV providers. If HBO Max pulls in all existing U.S. HBO subscribers, it would have some 35 million subscribers—and from there, would try to build on its base.

900 Million Reasons Why

Apple’s TV+ service, which launched Nov. 1, is part of a broader push into services—including subscriptions and credit cards—as it tries to offset declining sales of iPhones.

The tech powerhouse is charging $4.99 per month for TV+. Its biggest advantage is a base of over 900 million mobile phone users globally. Apple is building a TV ecosystem where it can sell you subscriptions to its own original programs on TV+, plus the ability to add on streaming services run by others—Showtime, HBO and CBS All Access, for example.

The glaring challenge is that TV+ has just nine shows at launch, and no library of past hits, putting a lot of pressure on the company to find a successful show in the early crop.

Other streaming services including Amazon have found it hard to create a hit out of the gate. “There is a lot of pressure on them because of the quality of Apple products,” said Francis Lawrence, an executive producer of “See,” an Apple show about a world where a virus has left mankind blind.

In addition to the giants, startup Quibi next spring plans to launch its own streaming service, which will be tailored to mobile phones and feature short-form content from Hollywood talent.

Six in 10 consumers think the new streaming options are a good development, according to the Journal-Harris Poll survey. Still, those who cut the cable TV cord to save money may very well find themselves paying as much by signing up to multiple streaming services, said TV producer Mike Royce, whose credits include “Everybody Loves Raymond.”

“It’s going to be cable again in five years, except it will be streaming services,” Mr. Royce said.


Reese Witherspoon in "The Morning Show," which premiered November 1 on Apple TV+. Photo: Apple 


Price: $4.99 per month

Launch: Nov. 1

Identity: Would you like some new TV shows with that iPhone?

Portfolio overview: Apple is offering a handful of shows at a low price (or free for a year to those who buy a new device) as well as access to other programming platforms such as HBO and Showtime.

Total programming: Launched with nine programs and plans to drop several more and some original movies in coming months.

Originals of note: “The Morning Show,” starring Jennifer Aniston andReese Witherspoon; “For All Mankind”

Classic movies: none

TV to rewatch: none

Biggest asset: access to 900 million potential customers (Apple device owners)

Biggest risk: Apple won’t be able to lean on a library of past TV and movie hits. No pressure, Jen and Reese! Apple’s new shows are getting mixed reviews.

Mary Poppins and The Mandalorian are among the entertainment options featured on Disney+. Photo: Everett Collection; Disney


Price: $6.99/mo

Launch: Nov. 12

Identity: Darth Vader meets Elsa

Portfolio overview: TV and movie programming from across Disney’s brands, Pixar, Marvel and Star Wars, including originals and a deep library of animated classics

Total programming: 7,500 TV episodes, 500 movies

Subscriber target: 60 to 90 million by September 2024

Originals of note: Star Wars’s “The Mandalorian,” “High School Musical,” “Lady and the Tramp” remake

TV to rewatch: 30 seasons of “The Simpsons”

Movie classics: “The Little Mermaid,” “Aladdin,” “Frozen,” “Mary Poppins” and more

Biggest asset: built-in fan base for popular franchises

Biggest risk: Original programming doesn’t meet superfan expectations.

“The Office” will be available on Comcast’s Peacock streaming service in April 2020. Photo: NBCUniversal/Getty Images


Price: Free for Comcast cable and broadband customers; subscription pricing not announced for non-cable customers.

Launch: April 2020

Identity: We are NOT the cable guy.

Portfolio overview: originals from NBC’s best-known creators, plus a big library of classics

Total programming: over 15,000 hours

Subscriber target: None disclosed yet.

Originals of note: “Battlestar Galactica” reboot; “Brave New World” featuring Demi Moore; comedy from Jimmy Fallon

TV to rewatch: “The Office,” “Parks and Recreation,” “Cheers,” “Everybody Loves Raymond,” “Brooklyn Nine-Nine”

Movie classics: “ET,” “Jaws,” “Back to the Future”

Biggest asset: rich library of classic programming

Biggest risk: Being late to the game; motivating customers to drop Comcast’s traditional cable service.

HBO Max will have classic movies like “When Harry Met Sally” and current hits like “Succession.” Photo: Everett Collection; HBO


Price: $14.99/mo

Launch: May 2020

Identity: It’s not HBO. It’s...HBO Max!

Portfolio overview: all HBO content; collection of programs and movies across Warner Bros. and cable networks including TNT, TBS and Cartoon Network

Total programming: 10,000 hours

Subscriber target: 75 to 90 million by end of 2025

Originals of note: “College Girls,” a comedy from creator Mindy Kaling; “Strange Adventures,” a DC superhero anthology from producer Greg Berlanti

TV to rewatch: “Friends,” “The West Wing,” “The Big Bang Theory”

Movie classics: “Casablanca,” “When Harry Met Sally”

Biggest asset: the HBO brand

Biggest risk: Consumers may find the price too steep; will shows like “Big Bang Theory” and “Friends” fit easily under the HBO Brand?


Netflix is still the streaming juggernaut, with classic movies like “Rocky” original shows like “Stranger Things.” Photo: Everett Collection; Netflix 


Price: $12.99 for most popular tier

Launch: streaming since 2007

Identity: Catch me if you can.

Portfolio overview: With a vast library of TV shows and movies and a growing number of popular originals, Netflix doesn’t want to replace one channel. It wants to replace them all.

Total programming: 1500 TV shows, 4000 movies

Subscribers: 158 million world-wide

Originals of note: “Stranger Things,” “The Crown,” “The Irishman”

TV to rewatch: “Breaking Bad,” “Mad Men” and, coming soon, “Seinfeld”

Classic movies: “Rebel Without A Cause,” “Rocky”

Biggest asset: A giant head start

Biggest risk: Lower cost rivals eating into its subscription base; programming costs rising.

“This Is Us” is one of the popular offerings on Hulu, which offers live TV and on-demand entertainment in one place. Photo: NBC 

Price: $5.99 with limited ads; $11.99 with no ads; $44.99 for 60+ live channels as well as ad-supported Hulu

Launch: 2008

Subscribers: 28.5 million paid subscribers; majority owner Disney projects 40 million to 60 million subscribers by fiscal 2024.

Identity: Disney after dark

Portfolio overview: Primarily adult dramas and comedies that are too risqué for family-friendly Disney+ or just aren’t a good fit.

Total programming: more than 86,000 TV episodes and 2,000 movies

Originals of note: “The Handmaid’s Tale,” “Castle Rock,” “Shrill,” “The Act” and “Little Fires”

TV to rewatch: “This Is Us” “Lost,” “ER,” “Rick and Morty”

Movie classics: “Hoosiers,” “Mrs. Doubtfire,” “Fatal Attraction”

Biggest asset: Only streaming service that offers live TV and on-demand all in one place.

Biggest risk: Its strategy gets muddled under Disney’s control. It recently lost bidding wars to keep reruns of “Seinfeld” and “South Park.”

Amazon Prime Video launched in 2011 and now offers classic movies like “True Grit” and original programming like “The Marvelous Mrs. Maisel.” Photo: Everett Collection(2) 

Price: $8.99/month, or included for those who pay $119/year for Amazon’s Prime shipping service.

Launch: Streaming since 2011

Identity: Thank you for purchasing the book. Would you like to see the movie?

Portfolio overview: A growing slate of originals, plus a huge library of older shows and movies.

The tech company’s video offerings are like the rest of the site: labyrinthine.

Total programming: Amazon doesn’t disclose this statistic. A Barclays 2016 report estimated Prime

Video had over 18,000 movies and nearly 2000 episodes of TV shows.

Originals of note: “The Marvelous Mrs. Maisel,” “Jack Ryan”

Classic movies: “True Grit,” “To Catch a Thief”

TV to rewatch: “Family Ties,” “Roseanne”

Biggest asset: Amazon Prime has over 100 million members, a huge potential audience.

Biggest risk: Dabbling in entertainment when its competitors are going all out against each other.

CBS All Access currently has 36 movies and 12,000 TV episodes, including “Star Trek: Discovery.". Photo: CBS


Price: $5.99 (with limited commercials), $9.99 (commercial free); both include live stream of CBS network

Launch: 2014

Identity: This isn’t your father’s streaming service … really!

Portfolio overview: a large library of current and older TV shows, a smattering of movies and a growing number of originals

Total programming: 12,000 TV episodes; currently 36 movies

Originals of note: “The Good Fight,” “Star Trek: Voyager,” “The Twilight Zone”

Classic movies: “An Officer and A Gentleman,” The Graduate,” “Moonstruck”

TV to rewatch: “The Brady Bunch,” “Cheers,” “Frasier,” “I Love Lucy.”

Biggest asset: experience, having been in the market for years

Biggest risk: Being able to keep pace with bigger competitors while also providing programming to Netflix and other streaming rivals.