The Stream Dream

Multimedia

We are all living in a streaming utopia where the need to be entertained trumps brand loyalty and this is as the world moves into a cycle of lower profitability.

The contraction of the economic cycle is evident in the latest round of US company earnings, and a recession in the US could now be a possibility. This phenomenon (cycle) is not unusual but highly unheard of for investors who are used to the fact that investments only go up and companies post record profits all year round.

The streaming and the multimedia of things will be affected, and the competition is heating up across the globe.

Let’s check out the latest touch points of our fav streaming services.

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Streaming/ Multimedia

The Walt Disney Company (NYSE: DIS)

An array of factors contributed to the slide in the share price over the last year, mainly coupled with the broader market sell-off, but COVID is still dampening Asia park's growth. Disney did, however, post more robust than expected Q2 earnings across its streaming service Disney+. Let us focus on streaming (Disney+):

• Disney + did post stronger-than-expected growth in streaming subscribers across all media platforms. Disney’s streaming play encompasses Disney+, Hulu, and ESPN+ with multiple other divisions, making it a well-diversified company compared to its peers.
• Disney+ subscriptions rose to 137.7 million during Q2
• Disney's parks, experiences, and products segment more than double revenue to $6.7 billion during the quarter.
• Disney+ also rolled out in South Africa and 41 other countries.

Netflix Inc (NYSE: NFLX)

It also had various factors that contributed to the share price drop (pandemic rebound, content issues, etc.) but was also affected by the broader "Tech Sell-Off" at the start of the year.

What makes Netflix different is investors solely focus on subscriber numbers which have become a double-edged sword coupled with content or the lack thereof.

• The company’s latest earnings report lowered the share price by 25% due to a significant drop in subscriptions for the first time in a decade.
• NFLX lost 200 000 subscribers in Q1 alone.
• The world’s favorite streaming service blamed increased competition, password sharing, and inflation for the decline.
• Netflix is not as well diversified as Disney+.
• Locally Netflix holds around 35% of the local streaming market share.

MultiChoice Group Limited (JSE: MCG)

• MultiChoice-operated Showmax commands a healthy 25% of the local streaming market.
• Disney+ can be added to your DSTV (a subsidiary of Multichoice)
• Disney+ aims to spend roughly R517 billion, about ten times MultiChoice's market capitalization, on new content. All of this is to keep up the momentum and gain new subscribers.

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Roundup

Customers are no longer loyal to a single streaming service or brand; they have become selfish and are lured by whoever has the best content at the best price. A standard plan for Netflix will set you back R159, Disney+ costs R119, and Showmax priced at R99 will make things interesting.

The multimedia sector will continue to see consumer behavior change as streaming service contracts do not bind customers; quality content could be key to keeping subscribers hooked. At this stage of the race, Disney could have the upper hand in the medium term.

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Sources – EasyReseach, The Walt Disney Company, Netflix Inc, MultiChoice Group Limited, Reuters, BusinessDay.

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Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.