Streaming Media Vs. Theaters
In the mid 1970‘s, there were tens of thousands of arcades across the country. When the home gaming system rose to power in the late 70’s, arcades began to loose the battle of market share, eventually getting wiped off the map. This is applicable to the field of cinema today. Movie theaters are dying off due to online and linear services.
Since the early 1900’s, the cinema business has been thriving, attracting people who want to get a night out and enjoy a movie. Netflix, however, brings a whole new twist to watching movies. It gives you the ability to watch movies in the comfort of your own home. Not only does it allow you to watch one movie in particular, yet it has a plethora of them from all genres. Cheap rentals of movies can also be found in red-box machines located outside various stores, Verizon FIOS, and Comcast Xfinity. Never before has movie theaters had so much competition.
Online movie providers such as Netflix charge a fixed rate each month to watch as many movies as you want, compared to the lump some fee for only one movie at theaters. Many argue that movie theaters simply provide the utilities for a consumer to actually enjoy a movie away from their home, which allows them to compete with Netflix. But is that the way of the future?
Lets look into the logistics for investment purposes. Movie theaters have a huge overhead which include utilities, personnel, etc.. They have a limited supply of consumers, limited theatre rooms and seats, and a limited amount of movies they could show. Companies such as (AMC) AMC Entertainment, (CNK) Cinemark Theaters, Marcus Theaters, and Harkins Theaters have lost tons of money by online and linear cinema. A company like Netflix still has utilities, yet it a different way. They stream videos out to households in the millions, compared to the theaters of a couple hundred. In 2013, Neflix posted a total subscriber rate of nearly 45 million around the world.
Corporations like Verizon and Comcast are bringing in huge numbers, and are only growing. Netflix has recently posted profits in the first quarter close to 53 million. For the past 5 years, (NFLX) has risen from $45 a share, all the way up to its current price of $400. Verizon (VZ) also had a share price of around $25, now to be priced at $50. This is the kind of longterm growth we are looking for in companies, and linear T.V. is were it is.
For the younger generation and new investor, investing in streaming media such as Netflix, compared to a theater, is a fork in the road. I believe, from a stock and business plan perspective, investing in the streaming media sector allows the investor larger room to grow. We are moving to new technological points, and I don’t think that movie theaters will thrive under the given circumstances. Although movie theaters aren’t going out of business tomorrow, I think that if we look down the road, our advancements in technology will surpass the out of date theater cinema.