The movie streaming industry has upended a sector that dominated the entertainment industry for decades. It is a leading industry that is expected to grow from more than $430 billion in 2022 to over $1.6 trillion in 2029.
A real war which has also enticed big players in other industries (such as Disney) to grab more users and generate more profits. To the delight of many traders.
In this article, we will explain how the streaming industry works and some of the top streaming stocks you can invest in today. We will also answer whether you should invest in streaming stocks.
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How streaming works
The streaming industry works in a relatively simple approach. Streaming companies like Netflix use two approaches to add content in their streaming applications.
First, the company can spend money to produce its own content. This is a very popular approach used by companies like Netflix and Disney. By producing their own content, these companies don’t have limits on where they can show them.
Second, companies can spend money acquiring content licenses from producers. This is another popular approach that these companies use. In this case, a company can buy content from popular producers that don’t have their own streaming platforms.
After receiving this content, companies can then upload them to their streaming applications where users can stream on their computers, smartphones, televisions, and television sets.
Types of streaming companies
There are several types of streaming companies in the industry. First, there are general streaming companies that provide all types of content. For example, you will always find diverse types of content in Netflix and Disney.
Second, there are niche streaming companies. These products focus on a single niche and aim to attract users who have these interests. A good example of this is Curiosity Stream, which is a company that focuses on documentaries streaming.
Third, there are companies like Spotify and Apple Music that focus on music and podcasts. Finally, there are companies that focus on streaming sports and general live content. Examples of these companies are FuboTV, DAZN and ESPN+.
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How streaming companies make money
A popular question is on how streaming companies make money. First, there are streaming companies that make money from advertisements. A good example of a streaming company that focuses on ads are Tubi and Redbox. However, these companies don’t have a lot of original content.
Second, there are those companies that focus exclusively on subscriptions. These firms make their money by funds that people pay on a monthly basis. A good example of this is HBO Max and Apple TV+.
Third, there are streaming products that use a hybrid format of making money. These companies make money by both charging a monthly subscription and advertisements.
Disney+ is a good example of this. In 2022, Netflix announced that it would start its own ad-supported package.
Are streaming stocks good buys?
For a long time, streaming stocks were some of the best investments in Wall Street. At the time, Netflic was so successful such that it became a FANG stock. As a result, many companies decided to enter the industry since Netflix had grown to become the biggest media company in the world.
The streaming industry peaked in 2021 at the height of the Covid-19 pandemic. Since then, many companies in the sector started to struggle. This happened as user growth stalled and even started to decelerate.
Too many players (maybe)
Another important reason why streaming stocks crashed was that the industry became saturated.
Today, Americans have a choice of tens of streaming companies that they can subscribe to. Worse, streaming companies like Netflix and Disney have made it substantially easy for users to unsubscribe.
The inflation's challenge
Another challenge for streaming companies is that inflation is a challenge. With competition rising, these companies will struggle to increase prices.
Therefore, while the streaming industry is set to grow, analysts recommend caution when buying these stocks.
Can the market become satured?
All this competition and growth presents risks to Netflix, which has enjoyed a near-monopoly status in the industry.
In one of the past quarter, the company announced that it had lost more than 100k customers from the United States. This was the first time its subscribers in the country declined and it came shortly after the company increased prices.
While the industry is doing well, the cost of developing content has been moving up. In 2020 alone, Netflix spent more than $15 billion on content. Apple, instead, spent more than $5 billion on content.
This means that content developers will be the biggest beneficiaries in the streaming war.
Top streaming stocks
There are many streaming stocks that you can trade or invest in. Let's break down those who are the fiercest in the streaming war.
Curiosity Stream is a tiny streaming company valued at over $85 million. The company offers streaming solutions that focus on documentaries. It has over 20 million users from around the world who pay $3 per month.
The chart below shows that Curiosity Stream’s stock crashed by more than 93% between April 2021 and September 2022.
Netflix is the biggest streaming company in the world with a market cap of over $106 billion. It has over 220 million users from around the world. At its peak, Netflix was valued at over $300 billion, making it the biggest media company globally.
The chart below shows that the stock crashed by more than 65% from its highest point in November 2021 and September 2022. This decline happened as the company’s growth slowed dramatically.
Warner Bros. Discovery (WBD)
WBD is another giant streaming company. It was formed in 2022 after the merger of Warner Media, a company that was owned by AT&T with Discovery.
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The company is known for its diverse brands like Discovery+, CNN. and HBO Max. In total, the company has a market cap of more than $30 billion and has over 90 million subscribers.
Paramount+ is another large streaming company that is owned by Paramount Global. It has a library of thousands of original content.
Most of its movies and series came from CBS, which is a company owned by a company known as National Amusements. Other shows in the platform are from brands like MTV and Nickelodeon.
Other streaming stocks are owned by companies that seek to grow their ecosystems. Examples of these companies are Disney+, which is owned by Walt Disney, Apple TV+, which is owned by Apple, and Amazon Prime that is owned by Amazon.
Music streaming stocks
Music streaming is another industry that has disrupted a sector that was on its deathbed. The industry is different from the previous services because of content owners.
Unlike movies and series, it is impossible for companies to create their music content. As such, streaming companies end up paying most of their revenues to record labels like Warner Media and Sony.
The top music streaming stocks are companies like Tencent Music and Spotify. Apple owns Apple Music while Block owns Tidal.
In this article, we have looked at the streaming industry and identified how it works. We have also noted how it makes money and identified some of the top streaming stocks to invest in or trade.
External resources about streaming war
- Streaming War Spurs Classic TV Arms Race - Wall Street Journal
- The streaming wars: Can Netflix come out on top? - Verdict