Streaming services have been having a bad time recently with Netflix stock plummeting and the CNN+ streaming news service closing after just a few weeks. Are there too many? Are people going back to non-internet activities as the Covid pandemic eases up? Are streaming services good investments of a sink hole that will swallow your money? We take a look at both Netflix and CNN+ so see if there are clues and useful insights to guide your investing.
The Very Brief Rise and Fall of CNN+
CNN invested $300 million to set up its CNN+ streaming news service. It hired Chris Wallace formerly of Fox News Sunday and Audie Cornish formerly of NPR. It developed unique programming to avoid disputes with cable carriers who carry CNN. On the face of it CNN+ did not achieve the number of viewers that had been projected. On the backside the new CEO of the parent company, Warner Brothers, David Zaslav was said to be unhappy that the CNN staff pushed the project to completion even as AT&T was selling Warner Media to Discovery. The take of the new management is that CNN+ was a nice product but not what the market needed. The $300 million spent on the project will be swallowed by the parent company so it is not a disaster but was not a profitable venture for investors.
The Tumble of Netflix
The FAANG high tech market favorites have not been having a good year. Apple, Amazon, and Alphabet are all down more than 10% but Meta is down 45% year to date and Netflix is down 64%. Part of this certainly comes from the pressures on the economy including persistent Covid, raging inflation, and the war in Ukraine. In regard to online entertainment Netflix and others profited when the world was locked down, seeking entertainment at home, working from home, or not working at all. As the world has moved closer to normal it should not be a surprise that fewer folks want to watch movies on cable or streaming over the internet. The sincerest form of flattery is imitation. Netflix was hugely successful so Disney, HBO Max, Peacock, and Amazon Prime all imitated the business model and have been taking customers from Netflix. If this were a switch in technology one might expect a new company to take over the niche and drive Netflix into oblivion. But the more likely scenario is that all of the competing companies offering streaming entertainment will share in the profits making each of them less profitable than they (or their investors) would like to be.
Will the Metaverse Have a Place in Streaming Entertainment?
Years ago, someone asked one of the original seven American astronauts to predict who would be successful in a tech niche. He responded that this would be easy within a five time span as, at the time, it took about five years to envision a product, develop it, and bring it to market. Beyond five years a new technology could emerge and totally change things. Today the timeframes may be shorter but the concept is still valid. We have written about how the Metaverse today is where the internet was in the 1970s. Interactive entertainment via the Metaverse may eventually be a factor in streaming services with the blending of programmed entertainment and interaction of the viewer. This will take much greater bandwidth and faster computing but given a decade or two this could be the next profitable step in streaming services. Picking the right company today could result in long term profits. Could it be Netflix, Amazon, or Meta? Good luck picking your favorites.
Are Streaming Services Good Investments? – SlideShare Version