Thinking of buying shares in a streaming platform? What to know before you invest
The past couple of years have seen many new entrants to the streaming services market, including Disney, Paramount and Amazon. So, how do their big show announcements impact share prices?
Just last month, Nielsen data revealed that streaming is now outperforming both cable and network TV for the first time ever.
The ongoing "streaming wars" has essentially pitted these companies' services against one another to determine which has the best range and value for price, piquing the interest of investors.
Investors may look for a service's upcoming release plans and company announcements to decide whether it would be a worthwhile investment, to predict potential peaks and troughs, or simply to gain whenever a service builds anticipation around new content or features.
If you're thinking of investing in streaming services, are platform announcements and release timelines a reliable indicator of a platform's future share price? Or are there other factors at play? Let's look at 3 of the big players in the space to find out.
On 26 July this year, Amazon announced that the price of Amazon Prime would go up mid-September for customers in the UK, Germany, France, Italy and Spain to combat increased operating costs and inflation. Following this announcement, Amazon's share price dipped from US$121.14 to US$114.80.
It could be implied from this that shareholders were shaken by the announcement and became concerned that customers would cancel their subscriptions due to the price increase, leading Amazon to experience a temporary decrease in its share value.
In cases where investors may anticipate a drop in subscribers, there may be observable changes in share price right after an announcement. But because Amazon is, of course, a massive corporation that encapsulates many different services, these drops are most times highly incidental.
In February 2022, Paramount announced a deal for new customers to celebrate the streaming service's 1 year anniversary, which meant customers could spend $1 for 3 months of streaming.
This announcement appeared to be reflected in Paramount's share price, as shares increased in price from US$27.85 at the time of announcement up to almost US$36 in the days following.
With little other news about Paramount in the days surrounding the share price movement, there is a strong possibility the streaming announcement positively influenced the price of Paramount shares.
However, like Amazon, Paramount Global is not made up of just a streaming service. It is a massive conglomerate of international TV network channels and services so its streaming arm's influence on share price is not particularly strong or long-lasting.
Unlike the previously mentioned companies, Netflix is exclusively a streaming service and so any links between announcements and share prices can be better attributed to cause and effect.
On 2 February, Netflix released "The Tinder Swindler", a documentary that became incredibly popular upon release, sending the price of shares soaring to US$457.13.
Prior to the release of this documentary, Netflix's share price had tumbled to its lowest levels since the pandemic at around US$359.70 due to a subscriber slowdown, which impacted investor confidence. While I don't suggest that Netflix tactically times content rollouts to gain investors, it is undoubtedly a consideration in the overarching timing of its content schedule.
Months later in April, Netflix shares plummeted by 26.8% in premarket trade after it was announced that the streaming service lost 200,000 customers in the year's first quarter.
Since the drop in April, Netflix is yet to convince shareholders that it is still the top-dog of the streaming industry, with shares currently sitting at around US$290. They were worth around US$350 late March. Looking at the Netflix chart, there is a strong decline in share price that has been ongoing since late 2021, when the company's share price peaked at US$691.69.
Happy viewers = happy investors
With many new and upcoming streaming services, it's difficult to tell conclusively how much these announcements and release plans have a direct impact on their share prices, as many of these services are a part of larger companies that span multiple avenues of business.
There seems to be no observable influence on the timing of content in order to mitigate predictable drops. To this extent, shareholders are not influencing what content comes out on platforms and when it comes out.
Where the link may exist is in the influence subscriber rates have on investor confidence – and of course, the fastest way to lose subscribers is to have a stagnating library of content in an increasingly competitive space.
Really, the streaming wars is an effective reminder for canny investors to look at the wide impacts and actions of the companies they're investing in. A new season of Squid Game may not boost your portfolio's profits, but a fatigued subscriber base, combined with a lack of innovation in other branches of a company, could be a clear sign of things to come.
Josh Gilbert is a market analyst at global multi-asset investment platform, eToro.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.