This is an easy piece for me to write. Why? Plain and simple. I am a huge fan of streaming entertainment. Even during working hours, I often stream the business through my Amazon (AMZN) Fire Stick. I still have cable. That's for my wife, but the day after she dumps me, the very first thing I will do is cut the cord. There is no need in this modern era unless one is attracted to certain hard to find stations or need more live sports than I do.
So, I got to thinking about how we entertain ourselves. I thought of AMC Entertainment Holdings (AMC) . In fact, I had briefly considered that name for my "Stock of the Year" pick based upon the minute downside risk per share. Then they threw another log (50 million shares) in the fire, and I thought better. So much for that. Think folks will go back to movie theaters? Think they'll go back to Broadway? There is something about going to the movies, but that may just be my age showing. As for Broadway, even if open, the city will have to find a way post-pandemic to protect individuals who head into the city with the intention of spending money. Right now, it's ugly.
Did you even know that the Walt Disney Company (DIS) now either owns or controls three of the top five subscription streaming entertainment services. That's right, and I'm a huge fan. Disney Plus (I've been watching Clone Wars, yes it is a cartoon. Wanna fight?), Hulu (Letterkenny may just be the greatest TV show of all-time) and ESPN Plus (Korean baseball at 2 am saved me while I was very sick) are my first three non-business go-tos. All three are growing and the fact that Disney has made public an absolutely incredible list of movie and shows headed for these services that will feature Star Wars, Marvel comics, and Pixar based content should continue to put the heat on industry leader Netflix (NFLX) , that is if folks ever start picking and choosing in order to save some money. Right now, it appears that there is (for now) room for all.
By the way, that's another point of contention between myself and my lovely bride of many decades. She loves Netflix, I love the three Disney services. Neither of us really watch Amazon Prime Video which is number two, by the way. I do love everything else Amazon does, just for the record. So, if she dumps me, now I'm up to dropping cable, and Netflix. Is somebody writing this down? Oh, and she is lovely. On this we also disagree, but she does not have my view.
Though there is nothing on Netflix that has really caught my eye, there are some services outside the top five that I kind of want to try. Expect Apple (AAPL) TV Plus to remain an also-ran for long? That Tom Hanks navy movie looks like some real "ooh-rah" type material. I don't think HBO Max, which is an AT&T (T) product, looks all that exciting, but then again AT&T also owns Warner Bros, and Warner Bros is going straight to HBO Max with that studio's entire 2021 theatrical line-up. The successful release of "Wonder Woman 1984" was the first such offering.
That brings us to ViacomCBS (VIAC) , one of my lousier stock picks of the past. This firm operates CBS All Access, which is about to be rebranded as Paramount Plus. How much do we need? Well, we probably need "Star Trek" right? That's CBS. Ugh. I could go on. There's still Starz, that's Lions Gate (LGF.A) , and in about another week, there will be Discovery (DISCA) Plus. All the cool kids add the word 'plus', just in case you have not picked up on this. That's it. I can't go on.
Where We Were
There is no denying that as the pandemic has forced individuals to make choices, and that most families are already paying for internet service (and now it's a business expense), that either reducing or cutting cable completely seems the obvious thing to do. According to Leichtman Research, major pay-TV providers had been losing almost 5 million subscribers per year in recent years, and one would expect to see the final numbers for 2020 show some acceleration of this trend.
What I think is this. While the pandemic shut down concerts, theaters and the cinema, it drove an acceleration in home entertainment. Stressed financial conditions probably have caused at least some folks to start thinking about narrowing those choices. That's bad for cable. That's also bad for streaming services that don't either serve a niche or have the ability to easily and affordably ramp up new content.
My favorite stock mentioned in this article is Amazon, my second favorite is Apple, but in neither case is much of my thesis based upon their streaming video services. The stock that I am not long but want to be is Disney. The company is betting the farm for now on expanding these services, as so many parts of the firm can not operate either normally or at all right now. As the pandemic ends, Disney will at some point become a juggernaut. The stock already is. That day is not today. That month is probably not this one nor one of the next two or three. However, that day will come. In the meantime, I do think that with January will come for equity markets at least some corrective behavior, perhaps after control of the Senate is decided.
Upon that weakness, I will have to start rebuilding my long position in Disney. Right now, with the last sale in the $182's, a trader can still write DIS January $165 puts for about a buck. Just an idea.