I believe it is fair to say streaming providers such as Netflix have changed the entertainment industry. After eliminating the old Blockbuster video stores I went to as a kid on weekends, the growth in streaming subscriptions has been phenomenal. This growth has been even more pronounced in 2020 as a result of the coronavirus pandemic and associated lockdowns.
There are a number of ASX shares that are benefiting from the rise of this trend in Australia, including News Corp (ASX: NWS) and Telstra Corporation Ltd (ASX: TLS), which share ownership of Foxtel, and Nine Entertainment Co Holdings Ltd (ASX: NEC), which owns streaming service Stan.
Subscriptions surge in lockdown
According to a press release by Roy Morgan, subscriptions to streaming services have soared during lockdown, with providers such as Netflix, Foxtel, Stan, Disney+ and Amazon Prime all showing increases in subscribers.
There are now almost 15.74 million Australians with access to a service, which is an increase of 5.9% or 878,000 in just three months.
Netflix still has a market-leading position in the streaming services space, with 13.28 million Australians subscribed.
However, Foxtel also saw strong growth, with 658,000 new subscriptions since lockdown period commenced, representing a 13.6% increase and bringing total subscriber numbers to 5.5 million. I believe this growth was assisted by the return of sport on Foxtel’s Kayo Sports and the release of its new streaming service, Binge. Foxtel ownership consists of News Corp, with a 65% interest, and Telstra, with a 35% interest.
Nine Entertainment’s Stan also grew strongly during the period, increasing subscriptions by 729,000 to 4.43 million, which is a 19.7% increase in 3 months.
Roy Morgan insights
Commenting on the numbers, Roy Morgan CEO Michele Levine said:
The rate of growth is astonishing with Netflix gaining more viewers in this three month period than they gained over the previous twelve months and Foxtel experiencing its strongest growth in many years despite the lack of sporting content during this period….
After a bumper few months, the challenge now becomes retaining these new customers in the period ahead as Australia gradually re-opens – although Victorians still have some time to wait on that front. Foxtel launched Binge, its competitively priced alternative to Netflix and Stan, at the end of May and this new offering will be a key part of Foxtel’s strategy to attract new viewers in the months and years ahead.
It will be interesting to see if these subscription numbers can be maintained and continue to grow, post-lockdown, for the streaming service companies.
In my view, Foxtel through its Kayo and Binge offerings may see continued growth, as customers explore the new content on Binge and tune in to the return of sport. I believe News Corp will benefit more from this exposure than Telstra, simply due to its larger share of ownership.
Additionally, embattled media share Nine Entertainment could potentially offset some of the coronavirus-induced decline in its advertising revenue with the strong growth in its Stan offering.