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The Growing Role of Content in Media


Senior Market Analyst at Interactive Brokers

Interactive Brokers’ senior market analyst Steven Levine provides a look into the media sector. It appears audiences continue to be found glued to whatever moving picture presents itself in front of them. The future of media consumption will most likely depend more on the quality of content than by the mechanics by which it’s delivered – that is whether it’s through video on-demand subscriptions or sitting in a movie cinema complex. Find out more in Stop. You’re Surrounded by Media at IBKR Traders’ Insight today!

Produced on September 9, 2019

Video Script:

The future of media consumption will most likely depend more on the quality of content than by the mechanics by which it’s delivered – that is whether it’s through video on-demand subscriptions or sitting in a movie cinema complex. According to data and analytics firm Ampere, those who subscribe to all three major streaming video services Netflix, Amazon Prime and Hulu, have access to nearly 15 years-worth of content, and that figure only soars higher when factoring in the scores of rivals vying for market share, including HBO Now, Starz Play, CBS All Access and IMDb TV, just to name a few.

But even with all that content at households’ disposal, audiences continue to flock to traditional theaters, mainly for first-run film releases. Giant movie theater chain AMC Entertainment Holdings, for example, saw its revenues rise in the second quarter, largely on the back of record-setting U.S. and International attendance, spurred by blockbuster films such Disney’s Avengers: Endgame. Meanwhile, Endgame is not the only stellar title to bolster Disney’s latest quarterly earnings, but the 33% year-on-year revenue increase in its studio entertainment division was also partly driven by the performances of Aladdin, Captain Marvel and Toy Story 4. However, Disney’s operations have faced other challenges in the latest quarter, especially since its US$71bn purchase of 21st Century Fox, which became effective in March. Operating results at the Fox businesses reflected a loss from theatrical distribution mainly due to the performance of the generally poorly received X-Men installment of Dark Phoenix.

Furthermore, Disney underscored the importance of content with its decrease in home entertainment results, which it said was due largely to lower unit sales of Black Panther in the prior-year quarter compared to Captain Marvel in the current one. Dave Novosel, a senior analyst at corporate bond research service firm Gimme Credit, recently noted that while he is optimistic about Disney’s Direct-to-Consumer & International business, it may be a few years before profits are realized. Novosel estimates the division’s losses will stretch into the next fiscal year “as Disney invests in the technology, content, and marketing required for its upcoming streaming service,” Disney+, which is slated to be launched November 12. He added that Disney will be “spending liberally on original content, and even more on licensed content.”

But the service will likely incur losses in the early-going, and much of its success hinges on whether the media giant can meet its goal of 60 to 90 thousand subscribers by the end of fiscal year 2024. Against this backdrop, investors watching developments in the media and entertainment industry will also likely be paying attention to Bank of America Merrill Lynch’s 2019 Media, Communications & Entertainment Conference to be held later in the week. Companies slated to attend include AMC, AT&T and IMAX Corp, among several others.

For more details, read my full article: ‘Stop! You’re Surrounded by Media’ available now at IBKR Traders’ Insight. In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more. I’m Steven Levine for Interactive Brokers.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Author Security Holding: No Positions

The author does not hold any positions in the financial instruments referenced in the materials provided.

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