US stocks closed lower, as the macro outlook remains unclear for the time being.
Yet things look different in streaming: Inflation takes Disney/Netflix/Spotify up, for the time being.
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Market recap
The $.SPX(.SPX)$ slumped 0.6% in its biggest loss so far this month, with widespread declines, while the $.IXIC(.IXIC)$ gave back 0.7%. Energy( $Energy Select Sector SPDR Fund(XLE)$ )was the lone S&P 500 sector ETF to go positive on the day. Industrials( $Industrial Select Sector SPDR Fund(XLI)$ ), health care(), and consumer discretionary were the worst performing, each down more than 1%.
“No hurry to rate cut” sends worry to the market. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in prepared remarks for an event at the Dallas Regional Chamber in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” Besides, US Presiden-elect Trump is making headlines again, this time for "casting a superhero movie with B-list actors"——The idea being that Trump is selecting his cabinet and advisers based on their loyalty and appearance, rather than their expertise.
Disney’s better than expected results and strong profit outlook for 2025 propelled shares 6.2% higher on the day. Q3, Disney's streaming media business revenue reached $321 million, achieving a turnaround from loss to profit, driving the stock price to rise by more than 6%. The market demand for Disney+, especially with the upcoming restrictions on shared passwords and price increases, is expected to bring more subscribers and revenue growth.
The MOAT: Having an edge
How come a company's long-term success doesn't get along with its sector per se? Look, in the same sector, there can be significant variances in competitive advantages and cost control abilities among different companies. The differences in profitability caused by varying industries are vastly overshadowed by the disparities in earnings among companies within the same industry.
A company's long-term success and competitiveness largely hinge on its strategies and execution. On one hand, consider the ability to generate new revenue streams. In fiercely competitive markets, it's crucial to assess whether a company can continually innovate and expand its user base. On the other hand, focus on cost management. Effective control and oversight of expenses stem from internal decision-making and efficiency, rather than solely from industry characteristics. Companies can implement targeted measures to minimize unnecessary expenditures and enhance operational efficiency, significantly impacting long-term costs. (Elon Musk: Welcome to DOGE)
Corporate competitive advantages are not static; they evolve with changes in market conditions, technological advancements, and consumer demands. Winners don’t always take all, but those who succeed consistently remain at the top. Winners win.
Deeper dive
Is streaming and entertainment still a money-making business? Yes at least for some.
$Walt Disney(DIS)$ 's pricing strategy and cost-cutting measures have bolstered market confidence in the profitability of the streaming industry.
New revenue streams: Disney has announced a new round of subscription fee increases. The ad-supported version of Disney+ will see a 25% price hike to $9.99 per month, while the ad-free version will rise by 14% to $15.99.
Expending user base: Disney has also taken steps to combat the "private" sharing of streaming subscriptions. CEO Bob Iger emphasized that subscription services are crucial for the company's profit growth, and curbing password sharing is an essential measure to achieve this goal. This September, Disney has actively cracked down on account sharing in the U.S., Canada, and other regions, introducing a paid sharing plan.
Cost management: The Company is aggressively implementing cost-cutting and efficiency-boosting strategies. A significant move in this direction is the reorganization into three departments, which includes laying off 7,000 employees and dissolving the uncertain metaverse division.
It’s not just video streaming where inflation is the norm. Spotify reported a big jump in its profits, thanks in part to price increases it recently implemented.
Similarly, the pricing strategy has significantly contributed to the performance of industry leader $Netflix(NFLX)$ which is also actively generating advertising revenue, with its ad-supported subscription tier gaining momentum.
The Company has successfully shifted its focus from merely increasing the number of paid subscriptions to enhancing profitability.
Netflix boasts 283 million paid subscribers worldwide, with 70 million monthly active users.
Going forward, Netflix plans to promote lower-priced ad-supported packages aimed at penetrating deeper into the market and expanding its share.
It’s not just video streaming where inflation is the norm. $Spotify Technology S.A.(SPOT)$ reported a big jump in its profits, thanks in part to price increases it recently implemented.
Spotify's recent price increase has also bolstered its financial performance. Q3, Spotify's revenue grew by 19%, resulting in a substantial increase in operating profit.
Also, Spotify gained 14 million new users, with an average of 640 million monthly active users, primarily from Latin America and other regions.
Guidance for Q4 has exceeded market expectations, and the company is optimistic about growth in user metrics (MAUs and subscriptions) as well as operating profit, alleviating concerns about short-term user retention and new customer acquisition following the price hike.
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