Entertainment industry trends and price prediction for 2020
We take a close look at where the music, film and TV industries could be heading in 2020
With the dazzle of the Oscars, Grammys and Golden Globes yet to fade, many investors are looking to the entertainment industry in the hope of exciting opportunities.
Media and entertainment industry overview
The Media and Entertainment (M&E) Industry, which includes motion pictures, television programmes, commercials, radio, streaming content, music and audio recordings was valued at an incredible $2.2tr in 2019.
At $717bn, the US media and entertainment industry accounted for a third of this, and is the largest M&E industry in the world.
What’s more, the industry continues to grow with analysts forecasting that the global M&E industry will reach $2.6tr by 2023. Accountancy firm PwC’s Global Entertainment and Media Outlook 2019-2023 forecasts that the media and entertainment industry in the UK alone will be worth £72bn by 2021, a £10bn rise since 2016. The US, on the other hand, is expected to reach $825bn by 2023, a whopping $108bn increase.
While a decade ago the music industry was in somewhat of a slump, the rapid rise of subscription streaming services Spotify and Apple have helped to boost music companies and lure investors back to the sector.
Universal Music Group
In December 2019, the world’s largest music company, Universal Music Group, home to artists such as Taylor Swift and The Beatles, was valued at $33bn, after parent media group Vivendi sold 10 per cent of it to a consortium led by Chinese tech giant Tencent.
Vivendi has since revealed that it plans to list the record company on the stock market from “early 2023 at the latest”.
Warner Music Group
Sir Len Blavatnik, owner of Access Industries, who bought Warner Music Group (WMG) for $3.3bn back in 2011, looks set for a windfall as the company has recently filed notice of its plans for a proposed initial public offering (IPO) of its common stock.
The group, which counts Warner, Atlantic and Parlophone among its record labels and Ed Sheeran and Dua Lipa among its artists, reported net income of $256m last year.
While the number of shares and price range of the offering have not yet been determined, it is estimated that the company could now be worth nearly twice what Access paid, at $6bn.
South Korean director Bong Joon-Ho’s smash-hit “Parasite” has wowed audiences and critics alike, gaining numerous accolades including the much coveted Best Picture Academy Award at the Oscar’s ceremony.
Not only was it the first foreign language film to gain this honour, its tiny production budget of just $11m was just a fraction of that of many of its rivals.
So far, Parasite has made $165m worldwide, but as the movie’s distributor Neon rolls it out to more locations, profits look set to rocket. This has proved particularly exciting for the tiny South Korean hedge fund that invested $500,000 in the movie.
Ryukyung PSG Asset Management Inc, which runs the hedge fund, has a history of investing in hit movies distributed by Korea’s CJ Group and has returned a remarkable 72.1 per cent since its launch in July 2018.
Interestingly, in the face of falling global interest rates investors in South Korea are turning away from manufacturing and towards the entertainment industry, in particular film, K-Pop and Korean soap operas. Parasite’s production company Barunson Entertainment & Arts Corp. shares have risen by 90 per cent this week. Samsung Securities Co. analyst Andy Kim explained to Bloomberg “Film funds are in the limelight at the moment.”
Walt Disney Co (NYSE:DIS)
The media giant seems to be going from strength to strength, with its acquisition of both Marvel Entertainment and the Lucasfilm in the last decade paying off in spades. With the theme parks and other franchises added to the mix, the total revenue for Disney as a whole reached nearly $70bn in 2019, with $10.4bn in profit.
Top companies in the entertainment industry
Looking at the States, Disney-produced films accounted for a third of the total US film market last year. If we include 20th Century Fox, which Disney acquired in 2019, the company as a whole represents a whopping 38 per cent of the market. This is remarkable when we consider its nearest rival, Warner Bros accounts for just 13.8 per cent.
It’s not just the music industry that is observing a surge in streaming services as TV streaming continues to grow in popularity too. But while Netflix was the darling of 2018, with the pioneering television streaming service beating Disney to become the world’s most valuable entertainment company with a market capitalisation of $182bn, last year proved a different story.
Subscriber number targets in the US were missed for two consecutive quarters in 2019, resulting in increased borrowing for the company, whose long-term debt has trebled since 2017.
However, things may pick back up in 2020, as the company is investing heavily in more non-English language content and subscriber numbers continue to grow in Asia-Pacific and Latin America.
The Walt Disney Co. launched rival streaming service Disney+ in November 2019. So far it has impressed analysts by gaining an incredible 30m subscribers since its arrival and hasn’t even been launched in much of Europe yet. With so much content, including the much talked of Star Wars live action series “The Mandalorian”, Disney+ is expected to integrate film and television and feature content from all of its studios.
Hot on the heels of its music streaming service, in 2019 Apple launched its own TV and movie streaming service, Apple+, as a direct rival to Netflix, Amazon Prime video and Disney+. Not only is the monthly fee competitively priced when compared to its rivals, it’s possible to get a year’s subscription for free with the purchase of certain Apple products. The service currently offers the Reese Witherspoon/Jennifer Aniston drama “The Morning Show” along with other original Apple content.
Walt Disney Co
While Disney has enjoyed some glorious years, 2020 will mark its first without the security of an imminent Avengers or Star Wars film for some time. The company is also suffering from the closure of its theme parks in China in a bid to limit the spread of the coronavirus. This could cost Disney $175m in revenue should the parks stay closed for two months. Hopes will be pinned on its forthcoming “Black Widow” and Marvel’s “The Eternals” movies, as well as the attraction of Disney+ streaming favourite “The Mandalorian”.
According to 24 analysts polled at CNN Business, the 12-month stock price forecast for Walt Disney Co has a median target of $162.50, an increase of 16.45 per cent on today’s price of $139.54, with a high estimate of $180 and a low estimate of $120.
Predictions for 2020
Analysts polled by CNN Business forecast a rise of 16.45 per cent for Apple in the next 12 months, with lows of $120 and highs of $180.
Wallet Investor’s forecast analysis also believes Apple to be a good one-year investment, predicting a price of $375.20 in 12 months’ time. Looking further ahead, Wallet Investor’s five-year forecast is $523.192, indicating a 65.5 per cent increase on today’s price.
Finally, mass media company ViacomCBS Inc (NASDAQ:VIAC) includes Paramount Pictures film studio, the CBS Entertainment Group as well as cable television networks Nickelodeon, MTV and Comedy Central within its group.
Analysts polled by CNN Business offer a favourable 12-month forecast, predicting a gain of 27.41 per cent on today’s price of $35.32 to $45, with lows of $31 and highs of $60.
Entertainment industry analysis
Investing in the media and entertainment industry is always going to be a tricky business, as it is almost impossible to predict which film/format/service will become tomorrow’s success story. But when it comes to music, film and television content it seems apparent that while box office sales and the purchase of physical media such as DVDs and CDs are important at the moment, streaming is going to be the buzzword for the future.
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