XS
SM
MD
LG
XL dev

Streaming Company Wars: What to Add to Your Investing Watch List

As millions of cable subscribers have cut the cord in favor of streaming services over the past few years, the competition has heated up, leaving both investors and subscribers confused. Here’s what to look for.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Streaming content: subscribers and investors seek clarity
5 min read
Photo by Getty Images

Key Takeaways

  • Both subscribers and investors may find the growing list of streaming companies difficult to scan

  • For watching, choose the streaming company that best fits your viewing and budget needs and demands

  • For investing, select a streaming company based on the entire business, not just the newest shiny thing

If you’re confused about which streaming company services to tune into, let alone invest in, you certainly aren’t alone.

We’re heading into the streaming wars—a battle for market share of eyes and attention as cable-TV customers cut their cords and gravitate toward services like Netflix (NFLX), Hulu (HULU), and Amazon (AMZN) Prime Video.

And now we’ve got a slew of newbies entering the fray, with power hitters like Disney (DIS), Apple (AAPL), and soon Peacock, part of the Comcast (CMSCA) family, AT&T (T) HBO Max, and Quibi, a Jeffrey Katzenberg/Meg Whitman startup enterprise. It’s all leaving many content guzzlers shifting uneasily on their couches.

“Over the last year there’s been this tide of streaming wars as consumers are leaning toward a cut-the-cable-cord mentality,” said Ben Watson, education coach at TD Ameritrade.

The lineups offered by streaming companies have become all the rage as traditional cable TV viewers have ditched those platforms in favor of specific services for, say, sports or movies. These services can cost considerably less than cable packages. The total number of pay-TV customers in the United States has been dropping at a steady rate since 2016—to the tune of 70% on a year-over-year basis—as cable TV bundle prices kept rising, according to a study by the Wall Street Journal.

“Traditional users are getting rid of their cable subscriptions and bundling a bunch of streaming providers like Netflix, Hulu, or Disney+,” Watson said. “As they’ve moved to those types of services, services like Hulu have become much more like cable providers.”

“It kind of defeats the purpose of cutting the cord in the first place,” he added.

Decisions, Decisions, Decisions

Consumers and investors alike are wondering which direction to turn. Which service is better? Which should I watch? Which best serves my entertainment viewing needs? And when all is said and done, could this end up costing more than my original cable subscription did?

Oh, and which companies might be the better long-term investments?

The cost question tends to be at the heart of many cord-cutting and streaming choices. NFLX holds the title for longevity; it began as a relatively affordable DVD mailer subscription service more than two decades ago.

As technology evolved, so did NFLX, into today’s online video streaming company. But NFLX is facing a huge wall of competition as the latest entrants have surfaced—some like DIS with already bulky movie catalogs, and others like AAPL with products that have armies of loyalists.

Streaming wars: Netflix, Amazon, Apple, Hulu, Disney
For illustrative purposes only. 

Limited Pricing Pressures

Streaming services are typically priced in affordable ranges and often become automatic debits from customers’ accounts. They can become a set-and-forget type of subscription, Watson pointed out.

“Those are some of the challenges for these companies,” he said. “They have relatively limited pricing pressure. They don’t have the ability to raise rates enormously without people thinking, ‘I can get rid of that.’”

They also don’t have long-term binding contracts, as cable subscriptions typically do. That means customers may disconnect and reconnect as desired.

In addition, services like NFLX and HBO have to spend money to make money. “That could present a challenge for building revenue streams and building value for investors, because they have to continue spending money to create original content,” Watson said.

The Costs of Staying Relevant

In many ways, that’s not unlike what many other large corporations have to do when they’re investing for growth or looking to keep their companies and products relevant. But in the streaming-wars business, the costs could be substantially higher and the sustainability tougher to achieve.

NFLX, for example, was up for 24 Academy Awards—the most of any movie maker this year—but walked away with only two. That doesn’t devalue the company, but more awards tend to attract a higher caliber of industry participants, moviegoers, and presumably investors.

Disney+ must also invest to create new content, but its fallback position is the deep library of Disney movies and TV specials that it has created and collected after nearly 100 years in the business.

And then there’s a platform like Apple TV+, which is new to the streaming-wars game but enters the fray with heavy artillery in its built-in fan base of Apple product lovers.

“Monetization becomes the language that all content creators have to speak,” Watson said. “Are they subscriptions? Is it ad-supported? And if it is, they have to be able to sell those ads and put eyeballs on them.

“The simple imperative is how to bring people to the platform,” he concluded.

The View from Above

The streaming companies’ landscape has changed dramatically over the last six months, and the revolution is really just beginning. Who knows what’s ahead, what new technology is on the drawing boards, or what new shiny thing might zip past the streaming-loving crowds.

Watson warned subscribers as well as investors to look carefully at what they’re getting before signing on the dotted line (or hitting the green button on the trading platform). For subscribers, he said to consider the streaming company service that offers the best selection to meet your personal content needs and demands, as well as what your pocketbook can afford.

For investors, he recommended looking at the whole company, not just the streaming choices. “Don’t just pick the next big thing because it’s new, it’s there, and it looks good,” he said. “Look at the company that supports it and the larger ecosystem around it. Is there enough there to support the value?”

Print

Key Takeaways

  • Both subscribers and investors may find the growing list of streaming companies difficult to scan

  • For watching, choose the streaming company that best fits your viewing and budget needs and demands

  • For investing, select a streaming company based on the entire business, not just the newest shiny thing

Related Videos

Call Us
800-454-9272

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing.

adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC, and a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of the Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 Charles Schwab & Co., Inc. Member SIPC.

Scroll to Top