The S&P 500 notched its sixth straight week of gains, the longest weekly winning streak in two years. Broad gains in the index were primarily driven by trade optimism over a phase 1 trade deal between the U.S. and China. Most of the weekly gains came on Friday after Larry Kudlow, The Director of the U.S. National Economic Council, said trade negotiations were down to the “short strokes.” Fed Chairman Jerome Powell also signaled optimism in the U.S. economy and the intent to put any further rate cuts on hold. The real star of the week though was Disney with their highly successful launch of their Disney+ streaming service. Investor engagement appeared to be focused more so on the “Streaming Wars” and less so on the live public impeachment hearings.
S&P 500: 3120 (+0.88%)
FTSE All-World ex-US (VEU): (-0.27%)
US 10 Year Treasury Yield: 1.84 (-0.10)
Gold: $1,466.8 (+0.57%)
EUR/USD: 1.1053 (+0.32%)
- Monday – KKR & Co. formally approached Walgreens Boots Alliance Inc. to take the company private in what could be the largest ever leveraged buyout.
- Tuesday – WeWork is in talks with T-Mobile’s John Legere to take over as the new CEO.
- Wednesday –Public hearings in the impeachment inquiry of President Donald Trump began.
- Thursday – The launch of Disney+ streaming service had over 10 million signups in one day.
- Friday – Hong Kong has officially entered recession territory as the further escalation in protests weighed heavily on the economy.
The streaming war saga has been playing out for a few years, but now we are finally getting to the good part! Consumers continue their steady trend of cord cutting with no signs of slowing down as they move away from traditional cable providers in exchange for a more a la carte approach via streaming services. This disruption is shaking up the ecosystem of content providers, distributors, and consumers by challenging core business models.
To better understand where we are, lets quickly recap what the landscape was and what it has transformed into today. In the “olden days,” watching television was free. Studios were the content creators, and networks and local stations broadcasted the content to the consumer which was paid for purely by ad revenue. Cable companies entered the picture in the 80’s with a model where customers paid a monthly fee for bundled premium content. Then, the evolution of the internet set the groundwork for a massive shift to streaming services.
Traditionally, streaming platforms paid licensing fees to content providers in exchange for streaming their content and the end consumer paid a monthly subscription to receive the content ad free, but even this is changing too. Fast forward to today and the industry disruption has been rather chaotic. Over the years, there have been multiple vertical and horizontal acquisitions. Massive dollar amounts are being thrown at producing original content by distributors and others alike. Some content providers like Disney have even decided to go directly to the consumer and forgo the safe revenue stream of a platform like Netflix. The result is plummeting costs to the consumer, saturation of available content, and a lot more choice in how that content is delivered to the end user.
Perhaps the most interesting shift by some of the more diverse players is the focus on how this new landscape can create value to the company’s broader business and relatively less focus on the revenue generated purely from their streaming services. It seems clear that it is not just about user growth, but the true value lies in the engagement and the ability to translate that into additional value. With big dollars thrown everywhere and a sort of hodge-podge competitor landscape, the stage is now set for the showdown. Let the games begin!
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