No one can deny that the migration from linear television to streaming is real. Consumers are more demanding about the entertainment choices they have these days, and the leading streaming services are fitting the bill. However, some platforms have killer advantages.
Netflix (NASDAQ:NFLX), Roku (NASDAQ:ROKU), fuboTV (NYSE:FUBO), and Walt Disney (NYSE:DIS) have a leg up on the competition. Let’s see why they have invisible moats that are sometimes misunderstood by the market.
Let’s start with the obvious top dog in this niche. Netflix was streaming — disrupting its own physical distribution model — long before the rest of the world caught up to the trend. Netflix is the undisputed leading premium streaming video service, hitting the midpoint of this year with 209.2 million paying accounts worldwide.
One might argue that the killer advantage Netflix has is scale, but it’s not as simple as the obvious benefit of reaching the largest audience in the market. Being the top dog means it can divide the cost of acquiring any new piece of content by the largest number of premium accounts. The cost per member of any new movie or series on its platform would be lower for Netflix than it would be for any of its smaller rivals.
Netflix also has more than two decades of streaming history. Netflix knows exactly what its subscribers are watching, and just as importantly what they’re not watching. It has its finger on the pulse of streaming entertainment in a way that is unmatched by anyone else. It’s not a surprise that Netflix has now increased its monthly U.S. subscription rates five times in the past seven years and keeps growing.
Agnosticism is the killer advantage for Roku. Unlike other streaming operating systems and dongles put out by tech or media giants with their flagship premium offerings to promote, Roku has historically played nice with the gamut of streaming apps. There’s a reason why there are now thousands of services you can download through your Roku.
It’s not always perfect. We saw Roku battle with two new services last year over revenue-sharing arrangements, but all parties eventually came to terms to make sure that those new premium offerings didn’t miss out on Roku’s massive audience.
With Roku’s platform revenue the key driver in the 81% year-over-year revenue surge in its latest quarter, it’s clear the model works. Roku’s agnosticism makes it a major draw to smart TV manufacturers looking for a built-in operating system and for consumers buying retail products to turn dumb TVs into smart ones. Roku’s recent moves to beef up proprietary content — like buying the now defunct Quibi content catalog — isn’t enough for any streaming service to see Roku as a threat instead of an ally.
We’re kissing our cable and satellite television bills goodbye, but a growing number of cord-cutters are turning to live TV streaming services to fill the void. fuboTV is still a small player in this niche, but its “sports first” positioning is making it the fastest growing player in the field. Revenue has accelerated in each of its first three quarters as a pubic company, nearly tripling in last week’s financial update.
Having a set demographic of sports fans is making it magnetic to marketers. Ad revenue per user clocked in at $8.70 a month for fuboTV, nearly triple what Roku is commanding — and the clincher here is that fuboTV is still collecting premium subscription revenue on top of that. Another killer advantage for fuboTV with its unique market positioning is that many sports fans enjoy wagering. By the end of this year fuboTV expects to launch Fubo Sportsbook, a gambling app that will work alongside fuboTV to update betting options based on what a subscriber is watching.
It may seem insane, but Disney+ wasn’t around two years ago. It launched in November 2019 and hit the ground running. Disney’s success in streaming is a testament to its unmatched properties.
Disney was the studio behind all six of the country’s top-grossing theatrical releases in 2019, the last good year for the multiplex industry. It operates the world’s most visited theme parks. Its Disney Channel and majority-owned ESPN are the top dogs in their respective markets. A hit in one of its divisions can quickly be adapted to be monetized elsewhere.
Disney+ became a major player out of the gate as a result of the media stock’s vault of content. Between its homegrown properties and the franchises it acquired in 10-figure deals for Pixar, Marvel, and Lucasfilm, no one comes close to the breadth of the House of Mouse for potential blockbusters.
Streaming entertainment is going to have a lot winners. It’s the present and future of video consumption. Netflix, Roku, fuboTV, and Disney have the killer advantages to stand out in the field.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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