Content streaming has become one of the fastest-growing industries in the world. The industry is growing by double digits as people shift from linear entertainment to video-on-demand (VOD) services. It was valued at more than $38 billion in 2018 and is expected to soar to more than $150 billion in the next five years. This article will look at the top 5 streaming stocks you can invest in.
How streaming works
The concept behind streaming is relatively easy. A company, like Netflix, produces or buys rights to the content and then stores them in giant servers owned by companies like Amazon and Microsoft. It then creates platforms where people can create accounts and stream the content.
The company then charges a relatively affordable price and attracts millions of customers. It uses these collections to create more content to build its moat. This model has been used by companies like Netflix and Disney. There are other streaming companies like Twitch and Huya that have branched to game streaming.
Streaming companies mostly make money through monthly subscriptions. Other companies like YouTube and Hulu use a hybrid method that combines subscription and advertisements.
Huya is a streaming company that most people in the United States have never heard about. Yet, it is a leading tech company with more than 100 million users and a market capitalization of more than $4 billion. Huya is a video streaming company based in China. It has more than 75 million monthly active users, mostly in China. In comparison, Twitch, a global platform, has more than 110 million users.
The company provides a platform that helps people stream their gameplay. It makes money by combining advertisements and subscriptions. Its popularity has grown substantially, generating revenues from more than $114 million in 2016 to more than $1.6 billion in 2020. Unlike most companies of its size, Huya is a profitable firm. It has moved from making $281 million of losses in 2019 to earning more than $137 million in 2020.
Huya is a good streaming stock because of its leading market share in China and the ongoing demand for video games. Most importantly, the eSports sector is expected to grow by double-digits in the next few years. The biggest risk is that the company could fall victim to the rising tensions between the US and China.
Amazon is a leading company that is best known for its e-commerce and cloud solutions. The firm is also directly involved in the streaming industry. It owns Twitch, the best-known game streaming service platform. It also owns Amazon Prime Video, a product that has more than 200 million customers. Most of these members are part of Amazon Prime service, which gives users perks like free delivery.
Amazon vs S&P 500
Amazon is also involved indirectly in the streaming business. For one, it counts most of the leading players in the industry as customers. Amazon provides data centers for companies like Netflix, Disney, and ViacomCBS. As such, Amazon makes some money whenever you pay your Netflix subscription. Therefore, Amazon is a good streaming stock to invest in.
Walt Disney is a highly diversified company with a market capitalization of more than $220 billion. The firm operates in various sectors like theme parks, cruise lines, television, film production, sports, and streaming. It has operations around the world.
Recently, Disney has transformed its business and placed a lot of emphasis on streaming. It launched Disney+ in 2019 and grew its user base to more than 109 million subscribers. This growth was mostly because of the company’s large library of content and its sizable marketing budget.
The streaming business helped to offset Disney’s losses in 2020 amid the pandemic. Its revenue dropped from more than $69 billion in 2019 to $65 billion in 2020. This was a relatively small drop considering that most of its businesses did not operate in 2020. For example, it was forced to close its hotels and theme parks, and cruise lines.
Disney vs S&P 500
Disney is a good streaming stock because of the fast growth of its Disney+, Hulu, and ESPN products and its vast experience in production. It also has one of the biggest content libraries.
Netflix is the king of streaming. The company has gained more than 200 million customers globally and grew its annual revenue from $8.8 billion in 2016 to more than $24.99 billion. Its profit has also surged from more than $186 million to more than $2.76 billion.
Netflix has remained loyal to streaming. Unlike other tech companies, it has not made any big acquisitions or diversified its business. Its business model is also relatively easy to understand.
NFLX vs S&P 500
You can multiply the total number of users with the average revenue per user (ARPU) and subtract content costs and get its profits. It also has a strong market share in the industry. Most importantly, its customers have not abandoned it even as new platforms come up.
Discovery is a large media company valued at more than $15 billion. The company owns popular television channels like HGTV, TLC, Lifetime, and Discovery. It has also pivoted to streaming with its DiscoveryPlus service that has more than 15 million subscribers.
Discovery vs S&P 500
Discovery is a good investment because of its upcoming merger with Time Warner, a company that owns HBO. This combination will create a media company valued at more than $150 billion. This scale will help it compete better with companies like Netflix and Disney.
Other notable mentions
There are other notable streaming companies we have not mentioned. For example, Roku is a company that helps streaming companies like Netflix and Disney+ be visible on TV. It is also building its streaming business.
Further, a company like ViacomCBS has Paramount+ with millions of subscribers. Additionally, Apple has a growing subscriber base of its Apple TV+ while CuriosityStream is a fast-growing niche streaming company.