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Taking some liberties with that headline because Netflix (NASDAQ:NFLX) and other streaming entertainment companies have been public for some time, but there's a new way for asset allocators and investors to tap into streaming without the need for picking individual stocks.
The Roundhill Streaming Services & Technology ETF (NYSEARCA:SUBZ) debuted Wednesday, marking the launch of the first exchange traded fund dedicated to streaming investments. Indeed, the newest ETF from Roundhill is a thematic fund.
Thematic funds are increasingly prominent parts of the ETF landscape and while the segment's start was arguably inauspicious, many of the most narrowly focused, unappealing concepts have been weeded out. That is to say thematic ETFs are maturing and addressing more relevant investment niches. Importantly, while these products shouldn't command an overwhelming percentage of a client's portfolio, they are useful in satellite fashion, particularly for clients seeking exposure to disruptive long-term trends.
“Invest in the long-term trends transforming the way we live and work by investing thematically. Thematic investing focuses on predicted long-term trends rather than specific companies or sectors, potentially enabling investors to access structural, one-off shifts that can change or create an industry,” according to BlackRock research. “Identifying opportunities for structural change and investing in expected transformations early (such as the rise of the internet in the 90s) may be a key driver of successful investing. This is particularly important for long-term investors seeking to include growth opportunities in their portfolios.”
Sizing Up SUBZ for Clients
Streaming, also known as over-the-top (OTT) content, is one of this century's pioneering disruptive technologies and is the foundation of the cord cutting movement. Speaking of the move away from linear TV, it was happening in a big way prior to the coronavirus pandemic, but the health crisis hastened that move, underscoring the long-term potential of streaming investments such as SUBZ.
It's estimated that last year, six million households parted ways with paid TV, bringing the total to 31.2 million – a figure that could jump to 46.6 million in 2024.
“Traditional media delivery is limiting, streaming is unlimited. With steaming, users pay a fixed rate for unlimited content that can be accessed at any time, from any device, from anywhere,” according to Roundhill research.
Further proving that SUBZ could be a well-timed idea, particularly for younger clients, is that there's still a massive number of cable subscribers, but the outlook for linear TV is rather bleak.
“Disruptive innovation typically evolves slowly, until it hits a tipping point. Since peaking in 2011, the number of US linear TV households has been declining at an annual rate of 2.1%, a rate that we believe will accelerate to -15% at an annual rate during the next five years,” said ARK Invest analyst Nicholas Grous in a recent report. . “Cumulatively, the number of US linear TV households could drop 48% from 86 million as of 2019 to roughly 44 million, a level last seen more than 30 years ago in the late 1980s.”
Modern Approach, Modern ETF
SUBZ taps into the idea of evolution in entertainment consumption. Think of OTT and the related investments this way: How many times have you said “I've got 200 cable channels and I only watch 10 or 20”?
Point is consumers want more bespoke options, something traditional cable is limited in delivering. Moreover, the allure of streaming isn't confined to watching TV and movies. That's a mere starting point for what's a rapidly changing technology and investment concept.
“Media streaming continues to grow rapidly as more consumers abandon traditional media andsubscribe to a select number of streaming services. This transition, accelerated over recent years,has taken place across multiple industries including video, audio, and even gaming,” saidRoundhill Investments Portfolio Manager Mario Stefanidis.
Obviously, SUBZ fits the bill as industry ETF that could be a compelling addition to portfolios of younger investors searching for high growth opportunities. Data confirm streaming is a growth area. Globally, 341 million people were paid subscribers of at least one streaming service in 2019, but Goldman Sachs forecasts that number will swell to 1.2 billion in 2030.
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