How to invest in media and entertainment companies

TL;DR

  • The U.S. media and entertainment industry is the largest in the world, worth $717 billion, and is expected to reach more than $825 billion by 2023.
  • Most of the media you see comes from one of the six major media companies, called “The Big 6.”
  • The U.S. publishing industry, which includes both physical and digital books, locked in $38 billion in 2018.

We are undoubtedly in a consumer culture in the U.S., and it’s not just the physical products we purchase day-to-day that make us that way. The content we enjoy is also an important part of the product consumption process that we create, and it’s everywhere. Just on a casual drive down the road, we can discover eye-catching billboards for upcoming movies, new music playing on the radio, and ads for video games at the bus station. Media is everywhere, and we as consumers enjoy the entertainment part of it.

The U.S. media and entertainment industry is the largest in the world. Valued at $717 billion, the media and entertainment industry represents a third of the global industry. The industry includes motion pictures, television programs, commercials, streaming content, music and audio recordings, broadcast, radio, book publishing, and video games, and ancillary services and products. The industry is expected to reach more than $825 billion by 2023, according to the 2018-2023 Entertainment & Media Outlook by PriceWaterhouseCoopers.

We see media and ads displaying everywhere in our daily life, but did you know 90% of the media you see in the U.S. come from one of these six major media companies: Comcast, The Walt Disney Company, News Corporation, Time Warner, Viacom, and CBS? These six media companies are known as “The Big 6.”

With hundreds of media companies in the U.S., we always find it difficult to relate the sub-companies to their parent companies. Sure, 20th Century Fox makes movies and music, but what about Fox Searchlight and Fox News—are they the same company? The answer is yes, and they are actually all owned by the News Corporation. Now, Public makes it easy to break down the profiles of conglomerates by providing each company’s profiles, earnings reports, and more in your hands.

Shares of stock in these big media conglomerates and their acquired companies can trade for more than $200 per share.

As these companies ask for a higher cost per share, some people with low investment budgets may not have enough money to invest in these companies flexibly. This leads to the common perception that only the wealthiest can capitalize on long-term investing.

Fractional shares, aka slices, change all of that. Thanks to slices, investors can buy stocks without having to purchase the whole share. Now, you can invest in your dream companies with whatever dollar amount you have. For example, if a company you like is trading at $100, but you have only $20 to invest, you could now buy 20% (or 1/5) of a share of the company. Should the price of that stock rise and you decide to sell, you would earn a return in proportion to your original slice.

This is helpful if you want to buy a stock that is more expensive than what you have budgeted. Buying slices of shares in different companies can enable portfolio diversification, and potentially lower your portfolio risk exposure to one single stock. In other words, instead of having all your money tied up with one share of a pricey stock, you can now buy slices of one share in multiple stocks. Buying slices of shares in different stocks can help diversify your investments and potentially reduce your risk.

What are media and entertainment companies?

Several decades ago, the answer would have been simple: newspapers and movies. But now almost everything you see or hear is considered to be media and/or entertainment. There are lots of subsectors in the industry and below we break big media and entertainment industries down into four subsectors.

Filmed Entertainment

This means films, movie theaters, T.V. subscriptions and electronic home video production, and distribution and consumption. Box office receipts were expected to surpass $11 billion in 2019, including cinema advertising earnings of $991 million. The mass adoption of streaming services has largely transformed this traditional filmed entertainment sector. The big players in this industry are adapting to either create their own services, like Disney+, or by acquiring smaller companies already doing it well.

Music

The music industry, including concerts and touring, grew to $22 billion in 2019. Aside from physical music sales, all recorded music segments are up, including digital, streaming, and sync licensing. Sync licensing includes T.V. ads, in-flight entertainment, satellite radio, restaurants, touring, live entertainment, and merchandise.

Book Publishing

U.S. publishing, which includes both physical and digital books, is the largest in the world, clocking in at $38 billion in 2018. Publishing is measured across three major segments: professional, educational, and consumer publishing. Consumer books cover the largest market share by far, followed by educational and then professional books. By 2023, digital publishing will account for nearly 60 percent of all U.S. publishing.

Video Games

While gaming and esports have their own special place in the industry, they can be included in media and entertainment as well. This sub-sector was worth $281 billion in 2019, which is more than double its size in 2016.

Why do some people invest in media and entertainment?

The media and entertainment industry has experienced firsthand the ripple effects that new technology has had on how people consume content. We are witnessing a major industry transformation from streaming to the Internet of Things to smart home entertainment.

Indeed, digital, mobile, social, and emerging technologies, such as virtual reality and AI voice technology, have sparked a marked shift in consumer behavior, particularly among the millennials. Together, these form what is known as the attention economy.

How do you find media and entertainment companies to invest in?

Research is everything! So before you dive in, it’s helpful to create a watchlist of stocks and ETFs in the media and entertainment sectors and get used to the theme. On the Public app, you can start with any stocks and ETFs that interest you, marking them as favorites without investing and keeping an eye on them as part of your daily or weekly routine.

Following news and updates from companies and ETFs you are interested in can help you stay up to date. You can learn a lot about them every day by keeping an eye on relevant market news. For all of the same reasons that a big part of being a good writer involves reading, being a great investor means researching. Learning, tracking, and staying engaged is helpful when you’re building up your knowledge.

The bottom line

Investing in media and entertainment is a popular path to pursue among many investors, but where to start? Dive into the sub-sectors and build up your knowledge. There’s a lot to take in. Since the inception of the industry, the industry has been a major part of American’s daily life. Companies in this industry are transforming and growing to provide the best content for consumers through technology innovation.

The above content is provided is paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.

Tweet