Since content is king in the streaming world, what will that mean to the industry over the next several years? In this video clip from "The M&A Show" on Motley Fool Live, recorded on March 18, Fool.com contributors Travis Hoium and Jason Hall examine some of the scenarios that may happen among all the players in the field: acquisitions, aggregators, stand-alone businesses, and licensees.
10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Stock Advisor returns as of 2/14/21
Travis Hoium: I think we're in agreement that there will be consolidation over time. What do you think that looks like? Let's just take this list for example. What do you think that looks like? Peacock is one of those, I don't know what they do, it's a huge business that's under Comcast (CMCSA -5.82%) NBCUniversal. They have theme parks, they're the Disney (DIS -1.01%) business model, but they're not Disney.
Then you've got all these tiny players like Sundance and Hallmark that could maybe tuck in with somebody else. But how do you think this plays out? Is it just going to be each of these bigger companies is going to buy a handful of smaller streaming services and studios or what does this look like?
Jason Hall: I think there's a number of different things that happened. First of all, I don't think we should assume that anybody on this list is too big to be acquired. Look at the Disney acquisition of 20th Century Fox, that was a giant deal that happened.
I wouldn't rule out any of those deals with the caveat that there's the antitrust stuff comes into play and whether or not it gets to a point where regulators say, "Okay, now we're affecting the consumer." but prices are going up, choices are getting too thin to be a competitive market, so I think that's a reality.
But I think we're going to see a couple of things happen. I think some of these are the smaller ones. I did a show with you and Mac that we ran Wednesday night that talked about Curiosity Stream (CURI 2.86%) as an example of a stock that's very far down that I own, but I made the bear case for, that the actual content that it owns, the value of that content on its books is very, very small.
This is a company that's burning a massive amount of cash. The cash that it has on our balance sheet is only going to get it so far. It doesn't look like a big buyout opportunity even at these prices because of the book value of its IP.
Hoium: Buyers going to get something, not just a streaming service is what you're saying?
Hall: Right, that's the thing. I think that's exactly it. With the Cinemaxes and the Epixes and AMCs, etc. There is some brand value, the name value. But for most of these, you're buying the content and you're just plugging the content into yours.
But then I think there's other ones like PBS Kids and Noggin for example. Those can be perfectly fine stand-alone businesses, they're part of another big enterprise already. They're stand-alone products because they're targeted as stand-alone products.
Hoium: They play to a niche enough to say this niche will be profitable, it doesn't need to be Netflix (NFLX 1.74%) or Disney.
Hall: Right. Because somebody else already owns it, that it's part of their strategy. It's not even really a target to get rolled up into any of these other businesses or to become part of Amazon's (AMZN -1.65%) aggregation strategy because that's another one. Amazon, I think, is a really good example of these, of the fact that you look at so many of these other names.
If you use the Amazon streaming device, you can make these a channel and pay for it through your Amazon. I think that will help a number of these, that's also the case for Hulu. It's not a streamer, but it's an aggregator that supports a lot of these as independents.
But I think the big thing is there's just going to be a lot of consumer fatigue from too many subscriptions. I think that's what could lend to more consolidation is because there's an opportunity to acquire and a lot of these are not going to work as stand-alone businesses or their owners may decide a better use of resources is to license the content out to others and not let it be part of our business.
