The Evolution of Entertainment Consumption
Streaming movies, music, TV shows, and podcasts have revolutionized how people engage with entertainment. The latest industry data illustrates that Americans spend approximately three hours daily immersed in streaming content, with 99% of U.S. households subscribing to one or more streaming services, investing an average of $46 per month. This escalating trend towards streaming has dealt a significant blow to cable television and other conventional entertainment mediums.
The Decline of Cable Television
The statistics depicting the dwindling number of U.S. households opting for cable television is telling. From its peak of 100 million subscribers in 2014, the count plummeted to 65 million in the early months of 2022, marking a substantial 35% drop. Recent surveys indicate that a quarter of households are contemplating ‘cutting the cord’ in the coming six months, underscoring the global shift in viewership habits. This paradigm shift presents an excellent opportunity to invest in streaming companies.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) has carved a niche as the leading player in the global streaming domain, deftly sidestepping the pitfalls encountered by competitors. Over recent years, the company has refined its strategies to align with its maturing position. Measures such as curbing password sharing among users and incorporating advertisements on its platform have been pivotal in maintaining its competitive edge and fostering continued growth.
The foray into live events and sports signifies a prudent move for Netflix, bolstering its subscriber base. Noteworthy ventures include a $5 billion deal to broadcast World Wrestling Entertainment’s (WWE) flagship program Raw from 2025, a forthcoming boxing match featuring Mike Tyson, and an NFL game on Christmas Day. Bolstered by robust financial performance, NFLX stock has surged by 45% this year, with promising signs of further growth.
Disney (DIS)
Disney (NYSE:DIS) has shifted its focus towards its Disney+ streaming service, a vital component of its overall business operation. In a strategic move, Disney has collaborated with Warner Bros. Discovery (NASDAQ:WBD) to present their streaming services through a bundled package. This bundling initiative integrates Disney+, Hulu, and HBO Max services into a combined offering, mirroring traditional cable TV models.
The bundled streaming services will offer ad-supported and commercial-free tiers. Disney will oversee distribution, collecting subscription fees and remitting a share to Warner Bros. Discovery. Subscribers gain access to a diverse range of content from mainstream networks like ABC and Fox to specialized channels such as HBO, CNN, and the Food Network. This comprehensive bundle comprises a plethora of popular content spanning Marvel superhero movies to classic shows like The Sopranos. Disney’s collaboration with Warner Bros. Discovery is indicative of its commitment to expanding its streaming services. Earlier this year, Disney, Warner Bros. Discovery, and Fox Corp. unveiled plans for a collaborative sports streaming service, slated for launch this fall. Against this backdrop, Disney appears to be a prudent investment amidst the ongoing streaming wars, with DIS stock witnessing a 10% surge in the past year.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG; NASDAQ:GOOGL), the parent company of the Google search engine, emerges as a formidable player in the streaming realm owing to its ownership of YouTube. While YouTube is commonly associated with user-generated short videos, the platform boasts a global viewership consuming over a billion hours of content daily.
While YouTube garners eight million subscribers, its reach extends far beyond, encompassing countless casual viewers. The platform is diversifying beyond short, homemade videos to include movies, TV shows, and video podcasts. In the first quarter of this year, YouTube’s advertising generated a substantial $8.09 billion for Alphabet. With revenue channels expanding to include fees for movie and TV show rentals, YouTube is increasingly becoming a revenue driver for Alphabet. Like its streaming counterparts, Alphabet also offers live sports streaming on YouTube. These dynamic shifts within YouTube are fortifying its position as a premier video streaming destination, contributing significantly to Alphabet’s financial standing. Alphabet stock has surged by 53% over the last year, including a 35% increment in 2024.
Embracing The Future of Streaming Stocks
Amidst the dynamic landscape of entertainment consumption, investing in leading streaming stocks presents an enticing opportunity. As the realm of streaming evolves and consumer preferences continue to transform, stalwarts such as Netflix, Disney, and Alphabet are strategic choices for astute investors seeking to capitalize on the burgeoning streaming market.