Entertainment’s Hottest Trend is Attracting Big Money
A massive deal could have major implications in the fight to be the top streaming platform.
For the last year millions of Americans and people around the world were forced to remain indoors and avoid activities that they would have otherwise enjoyed during normal times.
And that involuntary reclusiveness left a huge portion of the population looking for new ways to entertain themselves. For many, the answer came in the form of subscriptions to a myriad of streaming services that have become the most popular way to watch movies and shows.
In fact, more people today have a streaming subscription than pay for cable.
For some perspective on the incredible year streaming services had, Netflix added a record 37 million new subscribers over the course of 2020.
That sort of success is something that a handful of media companies are striving to emulate.
Yesterday, news broke about a huge merger that seeks to take advantage of the growing popularity of streaming services.
Where’s the money?
On Monday, AT&T Inc. (T) and Discovery, Inc. (DISCA) announced a merger of their media assets in a bid to create a more competitive platform with rivals like Netflix, Disney+, and others.
The $43 billion deal, which will create a new publicly traded company, will see AT&T unload its WarnerMedia assets – which includes the popular HBO Max service – as AT&T looks to return to its core wireless communications business.
Discovery is expected to give the HBO Max platform additional distribution capabilities around the world as HBO is preparing to launch its streaming platform internationally. Discover’s Discovery+ streaming platform gets more than half of its revenue from outside of the U.S. – with a lineup that includes popular channels like Food Network, TLC, HGTV, Animal Planet, and Eurosport.
The initial reaction to the merger was positive, with DISCA and T opening up 10% and 3.9%, respectively. But as the trading day wore on, bot stocks slumped below their prior close price as the market endured another down day.
The question now becomes whether the news of this deal is worthy of a spot in your portfolio.
Here’s what I think.
How do I get some?
This merger between T and DISCA is not surprising as we see the race for streaming content continues.
What is surprising is seeing DISCA down more than 5% by yesterday afternoon after it was up overnight and into the open.
I thought the news would have attracted a lot more buyers, but it is possible that traders are shying away from the streaming space. As I mentioned in yesterday’s article, Disney+ recently disappointed on its latest report of new subscribers.
It could be that, as the safety measures that were enacted during the pandemic loosen, we start to see a slowdown in new streaming subscriptions in the short-term as more and more people are able to get off the couch and back into public places.
That said, I believe that the inroads that the streaming industry has made over the past year are going to help the industry continue to grow. I expect the trend of viewers switching from cable to streaming services will only be stronger going forward.
So, my favorite name in the space is ViacomCBS Inc. (VIAC), which has made its own entry into the “streaming war” with its Paramount+ service. Much like Netflix, Paramount+ will rely on a stable of popular existing programming while investing heavily in its own original content - including 36 new series planned for the first year.
VIAC is currently trading at a deep discount from the highs it achieved in February, shortly after plans for Paramount+ were disclosed.
While the streaming space is getting more crowded, I think the risk to the upside is worth it for VIAC.
Everyone Will Soon Talk About THIS New Tech
Digital streaming content isn’t the only trend in the tech world that’s on fire right now.
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In the Spotlight: More Red Ahead for Bitcoin
Bitcoin’s worst pullback of the year continued yesterday, as the top cryptocurrency fell below $44,000.
And some believe the decline is only the tip of the iceberg.
Enthusiasm for Bitcoin and cryptocurrency in general has never been higher.
But since the highs established in mid-April, Bitcoin investors have watched the value of the world’s most popular coin fall from Nearly $65,000 to under $44,000.
Given the meteoric rise of Bitcoin since late January, a pullback was likely. I’m expecting a further decline in price before Bitcoin attracts new money and continues its bull run.
How deep that continued downtrend will go I can’t say just yet, but the opportunity it presents is enticing.
My colleague Tom Gentile and I are both extremely bullish on cryptocurrency, and we’ll be keeping tabs on the current situation with Bitcoin. Should we spot a bottom and a good buying opportunity, I’ll be back to let you know when to jump in. Stay tuned.