Streaming entertainment is widely viewed as one of the disruptive technologies benefiting from the shelter-in-place orders being imposed as a result of the coronavirus and while there isn’t a dedicated streaming ETF, the ARK Web x.0 ETF (NYSEArca: ARKW) is a pretty good proxy.
ARKW components “are focused on and expected to benefit from shifting the bases of technology infrastructure to the cloud, enabling mobile, new and local services, such as companies that rely on or benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media,” according to ARK Invest.
Thanks to the likes of Netflix, Amazon.com Inc. (NASDAQ: AMZN), Roku (NYSE: ROKU) and others, the streaming space is becoming increasingly competitive and that competition spotlights the utility of a fund such as ARKW, which helps investors avoid stock picking on their own.
Netflix still faces competition from up and coming rivals. WarnerMedia announced the name for its upcoming streaming service recently, HBO Max, and confirmed it will be the new home for the beloved NBC sitcom “Friends” along with new original programming. This means Netflix will lose the Emmy-winning comedy series come spring 2020.
Massive Growth Potential
As an industry, streaming is still in its formative stages and is on the cusp of potentially exponential growth over the next several years.
“According to our research, streaming revenue should more than quadruple during the next five years, from $86 billion today to $390 billion in 2024,” notes ARK.
What makes ARKW a more compelling option than passively managed funds is that with the benefit of active management, the fund goes beyond prosaic fares, such as Alphabet, Amazon, and Facebook. For example, Tesla is ARKW’s top holding and the fund features exposure to the likes of Square and Roku, stocks not often found for size in traditional internet ETFs. Roku, ARKW’s third-largest holding, could be a significant driver of the fund’s upside potential due to the burgeoning OTT market.
“Ad-supported over-the-top (OTT) streaming channels should gain significant market share during the next few years. According to ARK’s research, OTT ad revenues could increase more than 7x during the next five years, from nearly $6 billion in 2019 to roughly $44 billion in 2024,” according to ARK.
For more on disruptive technologies, visit our Disruptive Technology Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.