This article looks at the state of streaming giants and considers their future. Some of the companies covered include Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), Disney (NYSE: DIS), Paramount Global (NASDAQ: PARA) and Comcast (NASDAQ: CMCSA).
The entertainment industry is a fast-paced and evolving world with many moving parts. While streaming has come to dominate in recent years, so has the way networks reach out to potential viewers and subscribers. With Netflix, Amazon, and Disney sometimes disappointing shareholders, the sense of urgency to create fantastic content and cultivate a loyal fanbase has never been greater.
Netflix Embraces Advertising & Franchising
After a pandemic boom, Netflix subscriber numbers began to dwindle, and the network looked to be heading for a crisis. Not one to capitulate, Netflix surprised shareholders with a pivot to advertising. Now the company offers an additional payment tier, cheaper than its prior offerings but complete with adverts. Microsoft is thrilled to be named Netflix’s technology and sales partner in this endeavor, helping power its first ad-supported subscription offering.
Furthermore, Netflix is pursuing a franchise strategy. This means building its own version of Star Wars, the Marvel Cinematic Universe, or James Bond. It began with ‘Stranger Things’ and intends to continue in this vein with ‘The Gray Man’, ‘Bridgerton’ and ‘To All the Boys I’ve Loved Before’ spin-offs.
Developing a franchise of characters and themes viewers will love for generations has driven Disney's success and is why Amazon bought the rights to the Lord of the Rings and the works of Roald Dahl. It also explains Paramount Network’s multiple ‘Yellowstone’ productions.
This franchising angle has the potential to reap the rewards far into the future but requires considerable monetary investment, which only the biggest players can justify.
That is unless the streamers can adopt strategic ways of engaging new audiences.
Comscore State of Streaming 2022
Recently, the number of streaming services on the market has risen, and households are increasing the number of services watched each month. According to COMSCORE’s State of Streaming webinar 2022, 5.4 streaming services were watched per household in March 2022, up from 4.7 in the previous two years.
According to the same source, Netflix takes the crown for hours watched per week, followed closely by YouTube and then Hulu. Amazon Prime Video, HBO Max, and Disney+ consecutively come fourth, fifth and sixth.
While Netflix previously stated it would never introduce advertising, needs must, and the COMSCORE data shows this may be what the consumer wants. Americans are adopting ad-supported streaming services faster than non-ad subscription-based services. As the threat of recession looms, it seems free or affordable ad-supported streaming channels are the order of the day.
According to COMSCORE’s State of Streaming report 2022, “The Big 5” streaming services became “The Big Six” with the rise of HBO Max. This includes Netflix, YouTube, Amazon Prime Video, Hulu, HBO Max and Disney+. YouTube is owned by Alphabet (NASDAQ: GOOGL), and HBO is owned by AT&T (NYSE: T). But these six are not the only players competing for viewership. Apple (NASDAQ: AAPL) and Paramount (NASDAQ: PARA) are also rivals.
Ampere Analysis research showed Apple TV+ and Paramount+ are the most widely chosen platforms for viewers switching video-on-demand subscriptions. In its report, 11% of switchers chose Apple TV+ and Paramount+, while Netflix came in third place.
Report author and analyst at Ampere Analysis Ben French said:
Switchers are experimenting with different platform mixes within the home, moving spend to some of the newer and less penetrated services while maintaining a core base of services. It’s some of these newer, smaller services that the incumbent streamers most need to keep an eye on.
Although the North American and European streaming jurisdictions are becoming saturated, there are still growth opportunities worldwide for these companies to tap into. And as Netflix has shown with its unexpected pivot to advertising, these determined streamers are prepared to do what it takes to thrive in the fast-changing environment.
Comscore State of Streaming 2023
Indeed, the Comscore State of Streaming 2023 webinar highlights three main points:
More households are using streaming services with ads compared to those without ads. This trend offers great opportunities for advertisers to target streaming viewers.
Investment in specialized content is boosting the audience size for FAST platforms (FAST stands for Free Ad-Supported Television), with some experiencing double-digit growth Y/Y.
Digital and Connected TV (CTV) viewing has now surpassed traditional linear TV viewing in terms of hours watched.
These insights indicate a shifting landscape in the streaming industry, presenting new opportunities for advertisers and content creators.
Consumer Engagement
The future of streaming depends on cost and engagement. Investing in shows and brands with a long shelf life is part of the puzzle while engaging potential viewers is another. Advertising is likely to remain critical to this, along with collaborations, including influencer outreach.
Franchised content works particularly well with influencer audiences because fans recognize the characters, brands and themes. Preconceived notions can be tested and emotions triggered. It’s a compelling way to connect brands with consumers and will likely become a critical part of broadcast marketing.
According to the COMSCORE report, social media presents a prime location to share content, opinions, and anecdotes. Netflix dominates social media with clips, videos, images, and interactive content posts. Disney+ also drives engagement in this way. This will likely continue to be an essential traffic driver for the major streaming platforms.
How to Invest in Streaming Services
Investing in streaming services requires a keen eye for innovation and market trends. While the big players like Netflix, Disney and Amazon Prime may seem obvious streaming stocks to invest in, there are also emerging platforms that offer niche content.
Research the company's financials, understand its growth strategy, and assess the competitive landscape.
Why not read our Ultimate Guide to Investing in Media & Entertainment Stocks next?
Broadcast Television
While streaming services are on the rise, broadcast television still holds a significant share of the market, especially for live events like sports and news. However, it faces the challenge of adapting to changing consumer preferences, who increasingly seek on-demand, ad-free content.
Future of Streaming Apps
Mobile technology plays a critical role in the future of streaming apps. With 5G technology rolling out, streaming apps can deliver higher-quality content with minimal buffering.
Additionally, the integration of AI and machine learning helps these apps understand user behavior better, thus providing more personalized recommendations.
Investing in Streaming
There are multiple avenues to invest in streaming. Alphabet-owned YouTube still beats Netflix, Hulu and Spectrum in time spent watching. And AppleTV+ is known for its high-quality programming and investments in content.
Apart from the biggest industry names, AT&T, Paramount, and Fox are also entertainment stocks garnering investor attention.
HBO owner AT&T (NYSE: T) has seen its share price endure a volatile few years. The market saw AT&T repeatedly disappoint shareholders, but the company offers a substantial dividend yield and HBO’s recent performance and substantial subscriber gains could give the company long-term appeal.
Paramount (NASDAQ: PARA) earned 56 Academy of Television Arts & Sciences 75th Primetime Emmy Award nominations across its combined portfolio. Paramount Global, listed on NASDAQ as PARA and PARAA, stands as a global leader in media, streaming, and entertainment. It owns a diverse portfolio of iconic brands such as CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount+, and Pluto TV. Paramount boasts an extensive library of TV and film titles and excels in offering innovative streaming services, digital video products, as well as production, distribution, and advertising solutions.
Fox (NASDAQ: FOX) engages in the production and distribution of news, sports, and entertainment content via its key domestic brands, such as FOX News Media, FOX Sports, FOX Entertainment, FOX Television Stations, and Tubi Media Group. These brands hold both cultural and commercial value, allowing Fox to engage audiences, build consumer relationships, and offer compelling products. With a strong track record in news, sports, and entertainment, Fox aims to leverage its existing strengths while investing in new initiatives.
Will Netflix Stock Recover?
While Netflix (NASDAQ: NFLX) shares are far from their all-time high. The stock enjoyed a rally from mid-2022 through 2023. Nevertheless, in Q2, 2023, Netflix saw revenue growth of only 2.7%. This is much lower compared to the growth rates in the same periods for the past four years, which were 8.6% in 2022, 19.4% in 2021, 24.9% in 2020, and 26.0% in 2019. The numbers clearly show that the company's revenue growth is slowing year after year.
It seems Netflix still faces a challenging backdrop against rising competition and a strong US dollar, which weighs on its profitability.
Amazon Prime Video Embraces UK
Amazon (NASDAQ: AMZN) Prime Video is making significant contributions to the UK's film and TV industry, not only by producing popular shows across various UK locations but also by investing in talent development. Recognizing a skills gap in the industry, Prime Video has committed £10 million to the 'Prime Video Pathway' program to broaden access and offer opportunities to diverse backgrounds.
Warner Bros Discovery Inc (NASDAQ: WBD)
The merger between Warner Bros. and Discovery signifies a monumental shift in the entertainment industry. It combines Warner Bros.' extensive content library and production capabilities with Discovery's reality TV and documentary prowess. This merger created a powerhouse that could potentially redefine content creation and distribution on a global scale. The company aims to create a more diversified content portfolio, positioning it as a formidable competitor in the streaming wars.
Disney+ Expands Subscriptions
Walt Disney (NYSE: DIS) is also bringing in an ad-supported tier to attract new subscribers allowing advertisers to reach a wider audience. Starting November 1, 2023, Disney+ is expanding its subscription options in the UK and several other European countries to include an ad-supported plan, alongside its Standard and Premium plans. This move aims to offer consumers more flexibility in choosing a subscription that fits their needs.
Will Comcast Stock Rise Again?
Comcast (NASDAQ: CMCSA) is a global media and technology company. Comcast owns Sky, Universal, and NBC, among others. Comcast Advertising is the advertising division of Comcast Cable. Comcast Advertising fosters powerful connections between brands and their audiences and among publishers, distributors, agencies and other industry players.
Comcast's stock currently trades below its peak of $61.75 in September 2022. Despite rising above its low, influenced by the Federal Reserve's aggressive rate hikes to combat inflation, the stock faces challenges. These include a slowing broadband market and increased competition from 5G wireless carriers.
The media business is under pressure due to high inflation and reduced marketing spending. However, the company's financial stability is considered relatively secure, given its consistent operating cash flows.
Future of Streaming TV
As technology advances, the future of streaming TV looks brighter than ever. With the introduction of 4K, HDR, and even 8K streaming, viewers can expect a cinematic experience right in their living rooms. Virtual reality integration and personalized content algorithms are just the tip of the iceberg. Streaming TV is not just surviving; it's thriving and evolving at a pace that traditional broadcast television struggles to match.
The future of streaming TV also lies in its adaptability. As more people cut the cord, streaming services are becoming increasingly interactive, offering features like live voting during shows, real-time comments, and even social media integration. This level of interactivity turns passive viewing into an engaging experience.
The landscape for investing in streaming is dynamic and ever-changing. With mergers and acquisitions becoming commonplace—take the Warner Bros Discovery deal, for example—it's crucial to stay updated on industry news.