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Strategies & Market Trends : Value Investing
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To: Harshu Vyas who wrote (73690)9/22/2023 5:22:24 PM
From: Sean Collett1 Recommendation

Recommended By
Spekulatius

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IMO the streamers/entertainment companies are not as secure as you are making them to be as you compare to "broadcasters". PARA for example has had to consolidate numerous times by taking on ShowTime and CBS to make their concept profitable and stay competitive. And compared to a broadcaster their debt ratios may look nicer, but they still have $17B in debt on the books with revenues that are variable directly with the consumer (consumer can cancel direct any time with ease).

You have cable giant Comcast who then went and bought their way in via NBC which got them HULU. Then they went full-force into streaming with Peacock and that loses money. Think about that - they're losing money hosting a majority of their own content even with growing subscribers at Peacock (they had 13M subscribers last year and just reported 24M)...

WBD is doing so well they have to resort to re-licensing their own content back out. Ballers is back on Netflix, West World is elsewhere, plus a few other shows.

Disney+ is losing subscribers and also millions.

And the major risks they all have is they can be cancelled any time and ultimately are not needed. Not great risks to have for platforms that have continued to bleed costs. A Netflix will be a survivor here but some of these others are not as clear.

The constant price increasing by all of them also increases the probability of cancellation. HULU is increasing prices 20% (from $14.99/m to $17.99/m) and Disney+ has increased prices by 100% from the launch price. Since they launched in Nov 2019 they have raised prices an ave of 25% each year! This is still even a risk for a market leader in streaming like Netflix:


The end game here is continued consolidation. We will eventually transition to a digital cable based platform and in my view the broadcasters have some leg up being able to handle the leverage needed. When Bob Iger starts racking up that debt to make Disney+ work as well as keep the rest of Disney operating (e.g., spending $60B for parks and cruises) we will see how beloved he is by the board.

IMO it is too early to be picking individual winners or losers, but my point is more that I do not see streamers as clear cut winners and I do not see the broadcasters as dead.

-Sean
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