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This Streaming Upstart Is a SPAC to Watch

By Bradley Freeman - Dec 29, 2020 at 8:54AM

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Find out how this little-known company is poised for long-term success.

The global streaming market is set to grow 20% annually through 2027, according to Grand View Research. By 2025, total user penetration in the space is forecasted to briskly expand from the current 12.9% to 18.2%.

Netflix and Walt Disney are popular choices for people looking to invest in this space, but they're not the only options. CuriosityStream ( CURI -3.08% ) -- a relatively new and less established streaming service -- also looks to be a great emerging opportunity.

A hand pointing a television remote at a television

Image source: Getty Images.

About CuriosityStream

CuriosityStream is a post-merger special purpose acquisition company (SPAC) built as a streaming platform to satisfy the world's unquenchable thirst for knowledge. It offers premium content in subjects like science, technology, and history with the goal of "informing" and "enchanting" its quickly growing audience. The company acquires and produces content for its direct subscription service, as well as selling its content to larger distributors via bundles.

Interestingly, it also signs multi-year contracts with institutions such as universities to build co-branded streaming libraries on their behalf. With advisory board representation from the president of Georgetown University and a vice provost at Stanford University (among many others), there is good reason to believe this endeavor will be fruitful.

While competitors like Netflix specialize in scripted content, CuriosityStream is laser-focused on nonfiction, educational offerings -- and for good reason.

Creating premium, factual content costs about 10% as much to produce as a scripted drama, according to the company. By focusing strictly on this genre, CuriosityStream takes advantage of two important competitive edges. First, it can leverage this affordable content and profitably charge as little as $2.99 per month for subscriptions, and small fractions of a dollar for its content when bundling with distributors like Comcast. Higher production costs for platforms like Netflix and Disney+ require more expensive subscriptions compared to CuriosityStream.

Second, the company can build out a vast library of nonfiction content with a modest budget. This is quite important as CuriosityStream has $180 million in cash versus billions of dollars for its streaming peers. With the resources of a now public company, CuriosityStream already boasts over 3,000 nonfiction titles. By comparison, Netflix has roughly 500 nonfiction titles. CuriosityStream plans to expand that number to 12,000 over the next five years.

This backlog of content will be vital to differentiating CuriosityStream in an otherwise crowded space where competing services also offer factual content as a small sliver of their libraries.

Early success and more to prove 

This year, the company's revenue is set to jump 119% to $39.5 million. Through the year 2023, it expects a roughly 70% compounded annual growth rate (CAGR) to power its sales to $202.6 million. Subscriber count during the same time period (2020 to 2023) is estimated to grow at a CAGR of about 35% to 79.1 million when including bundled subscriptions.

By 2023, CuriosityStream is forecasting a 15% profit margin, translating to $29.9 million in net income. With a $547 million market cap as of this writing, hitting these financial goals should produce meaningful returns for shareholders.

The subscriber and revenue growth goals are somewhat lofty for such a young, unestablished company, but management certainly has a level of credibility.

The organization was founded by John Hendricks, the previous founder and chairman of cable network Discovery. Hendricks led Discovery to fabulous success over his decades with the company, hinting at his ability to establish CuriosityStream as a growing and profitable business.

Encouragingly, he has been buying up shares of CuriosityStream in recent weeks, raising his equity stake to over 820,000 shares as of Dec. 16, offering more evidence of his optimism. And along with Hendricks, most of the management team is made up of former executives at Discovery Communications as well.

A post-merger SPAC to consider

CuriosityStream can establish its leadership in a compelling niche within the attractive streaming industry. Its combination of early success and experienced leadership means investors shouldn't sleep on this new platform -- I've already added some of the stock to my portfolio, and it's at least worth watching.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

CuriosityStream Inc. Stock Quote
CuriosityStream Inc.
$6.60 (-3.08%) $0.21
Netflix, Inc. Stock Quote
Netflix, Inc.
$602.80 (-2.22%) $-13.66
The Walt Disney Company Stock Quote
The Walt Disney Company
$146.18 (-0.69%) $-1.02
Comcast Corporation Stock Quote
Comcast Corporation
$52.05 (1.06%) $0.55
Discovery Communications, Inc. Stock Quote
Discovery Communications, Inc.
$23.37 (0.52%) $0.12
Discovery Communications, Inc. Stock Quote
Discovery Communications, Inc.
$22.80 (0.57%) $0.13
Discovery Communications, Inc. Stock Quote
Discovery Communications, Inc.
$34.40 (-9.97%) $-3.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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