The streaming industry is still in growth mode. Industry experts expect growth rates of more than 20 % over the next few years. The tech giants have long since begun to adapt to the growing streaming industry and are investing heavily in their streaming platforms to reach the millions of users looking for content online. In this article, we introduce you to the streaming industry in general and a selection of streaming stocks in detail.
OVERVIEW OF THE STREAMING INDUSTRY
The streaming industry has undergone a remarkable development over the last two decades. It all started in the late 1990s with the introduction of internet radio and the ability to stream music online. But the real revolution only began with the introduction of video streaming services. Companies such as Netflix and YouTube have fundamentally changed the way we consume entertainment and paved the way for new companies and business models.
Technology and innovation have played a crucial role in shaping the streaming industry. Advances in internet speed and availability, the development of smartphones and smart TVs and the improvement of video compression technologies have enabled the streaming of high-quality content to various devices. In addition, innovations such as personalized recommendation algorithms and artificial intelligence have improved the user experience and increased customer loyalty.
The streaming industry is diverse and comprises various sub-sectors. These include
- Video streaming: Services such as Netflix, Amazon Prime and Disney+ offer a wide range of films, series and documentaries that users can stream anytime and anywhere.
- Music streaming: Platforms such as Spotify and Apple Music have revolutionized the way we listen to music, offering access to millions of songs and podcasts.
- Live streaming: Services such as Twitch and YouTube Live make it possible to stream live events or broadcast your own content in real time.
- Podcast streaming: Podcasts have experienced a boom in recent years, and platforms such as Spotify and Apple Podcasts offer access to a variety of podcasts from different genres.
BUSINESS MODELS IN THE STREAMING INDUSTRY
Within the streaming industry, different business models have been established with which companies earn money.
Subscription-based models (SVOD)
SVOD stands for subscription video on demand and refers to a business model offered by companies such as Netflix and Spotify. Users pay a monthly or annual subscription fee to access all content.
Advertising-based models (AVOD)
Platforms such as YouTube and Spotify Free offer their users free access to their content, but generate revenue through advertising that is shown during streaming. This business model is known in the streaming industry as advertising-based video-on-demand.
Hybrid models (freemium)
Some companies, such as Hulu and Peacock, use a hybrid model, which is a combination of the two models mentioned above. They offer both free and paid subscriptions, with the paid subscriptions offering additional benefits such as ad-free streaming or access to exclusive content.
GROWTH PROSPECTS FOR STREAMING SHARES
The growth prospects for the streaming industry remain impressive. According to Grand View Research, the global video streaming market is expected to reach USD 223.98 billion by 2028, with a compound annual growth rate of 21 % over the forecast period from 2021 to 2028.
The factors driving the industry's growth are manifold. These include technological advances that enable the streaming of high-quality content to various devices, the increasing availability of high-speed internet in different parts of the world and changes in consumer habits, which increasingly favor digital content over traditional media.
The major technology companies are playing a crucial role in shaping the future of the streaming industry. Companies such as Amazon, Apple and Google are investing heavily in their streaming platforms and using their extensive resources and global reach to attract new users and retain existing ones.
SELECTION OF LARGE AND WELL-KNOWN STREAMING STOCKS AT A GLANCE
In the table below, you will find an overview of some of the largest and best-known streaming stocks before we present five stocks in detail. The majority of these companies are based in the US, including some of the tech giants such as Google, Apple and Amazon. In the Chinese market, companies such as Tencent and Baidu have become very influential in the streaming industry. Stocks such as Spotify and Peloton also show the diversity of the streaming market beyond traditional media content.
| Company | Symbol | Country | Market capitalization |
| Apple Inc | AAPL | USA | 2862.47 billion USD |
| Alphabet Inc Class A | GOOGL | USA | 1620.25 billion USD |
| Amazon.com Inc | AMZN | USA | 1432.04 billion USD |
| Tencent Holdings Ltd ADR | TCEHY | Headquarters: China / Stock exchange: USA | USD 435.19 billion |
| Netflix Inc | NFLX | USA | 190.42 billion USD |
| Walt Disney Company | DIS | USA | USD 157.7 billion |
| Baidu Inc | BIDU | Headquarters: China / Stock exchange: USA | USD 52.79 billion |
| Spotify Technology SA | SPOT | Head office: Sweden / Stock exchange: USA | USD 28.52 billion |
| Roku Inc | ROKU | USA | USD 15.5 billion |
| Peloton Interactive Inc | PTON | USA | USD 3.21 billion |
NETFLIX
- Company: Netflix Inc
- Symbol (TWS): NFLX
- ISIN: US64110L1061
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 190.42 billion
- Turnover (TTM) in USD: 32.13 billion
As one of the first and best-known companies in the streaming industry, Netflix remains by far the largest pure streaming provider and industry leader with more than 230 million subscribers. Based in Los Gatos, California, the company has expanded its presence both in the US market and internationally. Netflix is not only a streaming service, but also a producer of series and films. Despite the high cost of entertainment production, Netflix has improved its finances and taken measures to increase free cash flow.
Brief analysis & outlook
In 2023, Netflix took several strategic steps to strengthen its position and accelerate its growth. These include measures to curb password sharing and the introduction of an ad-supported subscription tier at a lower price. These measures have helped to increase the number of subscribers and boost revenues.
In addition, Netflix has increased its investment in in-house productions and local language productions to support its international growth and appeal to a broader audience.
Despite these positive developments, the growth rates for sales and profits were recently only in the low single-digit range, and the managers issued a moderate forecast for the third quarter.
Between November 2021 and May 2022, the Netflix share price suffered a very sharp slump, falling from around USD 700 to around USD 165. The share price has since stabilized again and a new upward trend has been established. The outlook among analysts is also currently positive. 36 analysts have issued an average price target of 462.11 $ for 2024.
WALT DISNEY
- Company: The Walt Disney Company
- Symbol (TWS): DIS
- ISIN: US2546871060
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 157.70 billion
- Turnover (TTM) in USD: 86.98 billion.
The eagerly awaited streaming service Disney+ was launched at the end of 2019. In its first year, it gained several million subscribers worldwide and quickly became the second-largest subscription streaming service after Netflix. Disney also owns the streaming services Hulu and ESPN+. Combined with its own extensive entertainment offerings and assets acquired from 21st Century Fox, Disney has become a formidable player in the streaming TV space. Although Disney is an old and very well-known media and entertainment company, its streaming services already account for more than a third of the company's valuation.
Brief analysis & outlook
Alongside Netflix, Walt Disney is one of the best-known streaming stocks. Despite some challenges in recent years, the company has considerable potential for future growth. The stock has lost more than 50% in value over the last two years and is currently trading just above its 52-week low. Nevertheless, analysts from Wells Fargo or Panda Forecast see considerable potential in the share and forecast high price increases. The positive outlook is based on the assumption that Disney will be able to further reduce its costs and make its streaming services profitable.
The return of Bob Iger as CEO in November 2022 was welcomed by analysts and investors. Iger has already started to cut costs and overhaul the company's TV and streaming business. In addition, Disney has announced plans to reduce its annual overhead costs by 5.5 billion dollars, which should improve the company's profitability. This plan also includes the elimination of approximately 7,000 jobs.
SPOTIFY
- Company: Spotify Technology S.A
- Symbol (TWS): SPOT
- ISIN: LU1778762911
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 28.52 billion
- Turnover (TTM) in USD: 12.42 billion
Spotify is a Swedish company that operates the world's leading music streaming platform. With over 220 million paying subscribers and 551 million monthly active users, Spotify is the undisputed market leader in the industry. The company has continuously expanded its user base in recent years despite strong competition from Apple Music and other services.
Brief analysis & outlook
Spotify has shown impressive growth momentum in recent years. The company has successfully expanded its user base despite intense competition from Apple Music and other services. It is worth noting that Spotify has not raised its prices in the US for 12 years, while other services such as YouTube Music, Apple and Amazon have raised their prices. This could be a strategic advantage for Spotify and help it to further expand its user base and gain market share. Spotify has managed to increase its premium subscribers to 205 million, which is well above analysts' expectations. In addition, monthly active users have risen to 489 million, compared to a consensus of 478.5 million. If Spotify can continue its growth of 10% to 11% on average over the next seven years, the platform could reach up to one billion active users by 2030.
Analysts are optimistic about Spotify's future. The average price target for Spotify shares for 2024 is USD 171.26, which is higher than the current share price. Fundamentally, Spotify generated revenues of €3.17 billion in the second quarter of 2023, which corresponds to an annual growth of 14%. Despite this strong revenue growth, the company reported a net loss of €302 million for the quarter. This indicates that Spotify is continuing to invest in its growth and could potentially become more profitable in the future.
ROKU
- Company: Peloton Interactive Inc
- Symbol (TWS): ROKU
- ISIN: US77543R1023
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: 12.16 billion
- Sales (TTM) in USD: 3.22 billion
Roku was founded in 2002 and is now a leading provider of devices and media for streaming TV content and music, particularly in the USA. The company offers various products and enables users to access a very wide range of streaming content from various providers, including movies, TV shows and live sports. The platform is available on smart TVs, streaming sticks and TV boxes. Roku acts as a kind of central interface to manage and consume various streaming subscriptions. Roku sells its smart TV software and streaming devices at minimal cost and instead earns money through advertising and by managing subscriptions.
Brief analysis & outlook
Roku shares have experienced a rollercoaster ride in recent years, with a rise of over 500% from March 2020 to February 2021 and a subsequent massive price slump. At the end of July 2023, the share managed to break above the chart-technically important USD 80 mark, thus confirming the new upward trend. Revenue and earnings growth have not been particularly impressive in recent quarters, but continued high sales growth gives rise to a positive outlook. Roku has partnerships with companies such as YouTube, Shopify and Amazon and recently announced an agreement with e-commerce giant Shopify to allow users to buy products they see in ads.
AMAZON
- Company: Amazon.com Inc
- Symbol (TWS): AMZN
- ISIN: US0231351067
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: 1432.05 billion
- Turnover (TTM) in USD: 538.05 billion
Amazon is primarily known for its online marketplace. However, in addition to online retail, Amazon also has a strong presence in other areas. One important business area is streaming video and music content. With Amazon Prime Video, the company offers a variety of films and TV shows that are either included in the subscription or can be rented or purchased individually. In addition, Amazon has increasingly invested in the production of its own content in recent years and has already produced several successful series and films.
Another important business area is Amazon Music, a music streaming service that is available both as part of the Prime subscription and separately. Amazon Music offers access to millions of songs and is available in many countries worldwide.
With Amazon Web Services (AWS), Amazon is also a major provider of cloud storage solutions, which are an important revenue driver for the company and are used by many large companies and organizations worldwide.
Brief analysis & outlook
Amazon has also become one of the leading players in the streaming sector. In addition to Amazon Prime Video, Amazon also benefits from the growing streaming industry through AWS and is used by Twitch, the world's largest streaming service in the gaming sector, which was acquired by Amazon in 2014.
The sales forecast for Amazon for 2023 is USD 562 billion, which represents an increase of USD 7.1 % compared to sales in the last 12 months. The EBITDA forecast for 2023 is USD 84.4 billion, which represents an increase of USD 45 % compared to the EBITDA of the last 12 months. The net profit forecast for 2023 is USD 16.5 billion, which represents an increase of USD 293.2 % compared to the net profit of the last 12 months
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