The entertainment industry is one of the most competitive and volatile markets in the world. There are many different types of entertainment stocks, including those related to movies, TV shows, sports leagues and teams, music companies, video game makers and more.
The success or failure of these companies can change on a dime—and because of how fast the industry is changing, many companies might not be around much longer.
But despite this riskiness (or maybe because of it), there’s potential for a lot of money here if you know what you are doing: In fact, some investors are making millions by betting on entertainment stocks right now.
Understanding what you should know before investing in entertainment stocks in 2023 is crucial for effective fiscal planning. In this article, we will talk about what you should know before investing in entertainment stocks in 2023 and beyond.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
We don’t advocate that the average investor buys individual stocks. ETFs are usually lower risk.
What are the different kinds of entertainment companies?
Film and Television
This segment includes the creation, distribution, and viewing of movies, movie theaters, cable television, and electronic home video.
Over $11 billion was predicted to be made at the box office in 2019, with $991 million coming from theater advertising.
This once-staple industry of film-based entertainment has been drastically altered by the widespread adoption of streaming services. The major players in this field are adjusting by either developing their own services, like Disney+, or acquiring more nimble competitors.
Private equity and hedge funds can be a lucrative entry point into the film industry. These vehicles are now the standard for direct financing of film projects.
As a result, this option is not for inexperienced investors. Institutional investors and family offices are better able to handle the substantial risks associated with such ventures.
There is substantial potential for both success and failure if you can and choose to pursue this path. Checking offering documents for compliance with securities laws is a must.
Slate financing, a method used by hedge funds to mitigate risk and maximize returns, is central to their operations.
The idea is to spread your money around and finance multiple films rather than just one. Better risk/reward symmetry can be attained through diversification.
The fund’s co-financing efforts with the production and distribution company through the film studios may determine which films are included in the portfolio. In the pursuit of greater transparency, one of the challenges is untangling opaque financial accounts through due diligence.
There is another option for the average investor. A great way for filmmakers to raise capital from a large number of patrons, crowdfunding has recently become a popular investment option among many would-be movie moguls.
Independent filmmakers who previously may not have had access to capital can now do so by soliciting donations from a large number of individuals. One active crowdfunding platform in the film industry is Movie Investor.
Like any other investment, you should research a film production thoroughly before committing your money to it.
Even if a plan seems promising on paper, further investigation into its particulars is warranted. Learn as much as you can about the project(s), the team, and their previous work.
Also, make sure you look into the filmmaker’s return on investment. Some people might be content with just giving away movie memorabilia as a thank you.
Indirect investments in the film industry are possible. Investing in the entertainment industry can be lucrative, but keep in mind that you won’t be credited as a producer.
The likes of Lionsgate, Viacom, Netflix, Disney, and Amazon all contribute to the production of expensive movies. And because they tend to have a wide variety of products and services, you can spread out some of the risk associated with a stock market investment.
Music
All markets for recorded music, including downloads, streams, and sync licensing, are growing. Television commercials, in-flight shows, satellite radio, eating establishments, traveling shows, concerts, and merch are all examples of sync licensed uses.
Technology has and will continue to change and disrupt the music business. It also continues to play a pivotal role in the larger entertainment sector.
Consequently, despite the fact that music stocks are often disregarded, the industry is a good place to look for investment opportunities.
MIDiA Research estimates that in the first three quarters of 2022, the music industry earned a total of $49 billion from sources like live concerts, streaming, publishing rights, and record label earnings.
The previous high was $32.9 billion in 2021, so this was a significant increase. Demand for both live music and concerts in general, and streaming services in general, has rebounded strongly since the pandemic.
Books and Publishing
There are three main types of publishing markets: trade, academic, and popular. The market for books aimed at consumers is vastly larger than that for books aimed at educators or professionals.
Nearly 60% of all publishing in the United States will be done digitally by 2023.
Although the retail bookselling industry in the United States is struggling due to the rise of digital media, consumers still value books highly in their daily lives.
The annual unit sales of printed books have increased and now routinely top 700 million. Sixty-five percent of American adults have read a print book within the past year, making it the most widely consumed book format in the country.
Meanwhile, the audiobook industry is worth over $1.5 billion annually, and new releases keep coming. While print will continue to dominate for some time to come, e-book sales are on the rise as well.
There have been major shifts in the retail industry in recent years. The ability of large physical retail chains to compete with online retailers like Amazon remains constrained, despite the fact that book stores in the United States still bring in several billion dollars annually.
Even major bookstore chains like Barnes & Noble were hit hard by the early stages of the COVID-19 pandemic, with the chain being acquired by an investment management firm and hundreds of stores closing.
Despite the growth in digital book sales in 2021, print books still dominate the U.S. book market. Out of the total of $9.4 billion, over $3.5 billion came from sales of hardcover books; sales of paperback and mass market books also went up from the previous year.
On the other hand, sales of physical audio have been falling since 2017. Without complete transparency from all publishers, it is difficult to get a complete picture of the e-book market as a whole.
Nevertheless, the available data shows that U.S. trade e-book revenue remained stable at around $1.1 billion in both 2020 and 2021.
The U.S. book market continues to be driven primarily by print sales.
Although newspapers and magazines aren’t doing as well as they once did, printed books are actually in better shape than the public might think, and they’re still quite popular among readers in the United States and other major markets around the world.
Video Games and eSports
Despite the fact that gaming and esports occupy a unique niche in the market, these activities can also be classified as forms of entertainment and media.
The popularity of video games and the amount of time people spend playing and consuming related content has skyrocketed in recent years.
More than doubling in size from 2016 to 2019, this market segment is now worth $281 billion.
According to a report by newzoo, the number of gamers will reach 3.2 billion by 2022. The average gamer spends 13 hours per week playing video games, per a separate report by the Entertainment Software Association (ESA).
Sixty-five percent of all adults in the United States are gamers. Video games have evolved into a popular means of communication as well as a form of entertainment.
Eighty-three percent of gamers now play multiplayer games with real-life or virtual companions, up from 77% in 2021 and 65% in 2020.
The gaming market is projected to expand rapidly over the next few years, from its current $200 billion. According to Accenture, the total value of the gaming industry in 2021 will be $300 billion.
According to newzoo’s projections, the global games market will be worth $225.7 billion by 2025, representing a CAGR of 4.7% between 2020 and 2025.
Another study estimates that the gaming industry will be worth $339.95 billion by 2027, growing at a compound annual growth rate (CAGR) of 8.94% from 2022 to 2027.
In 2022, mobile was the primary growth driver, contributing 53 percent of the worldwide market’s revenue, up from 48 percent in 2020.
Why should you be investing in entertainment stocks?
The media and entertainment sector has felt the effects of technological change on content consumption firsthand.
Streaming services, the Internet of Things, and smart home entertainment are all dramatic changes transforming the industry.
Consumer behavior has changed significantly, especially among millennials, as a result of digital, mobile, social, and emerging technologies like virtual reality and AI voice technology.
The sum of these parts is dubbed the “attention economy,” and is a growing market that is worth watching.
Companies that produce content such as TV shows, movies, books, and magazines can make big money from advertisers willing to pay for access to their consumers’ attention.
As more consumers become digitally connected, the media industry has seen rapid growth in revenue and profitability.
The popularity of smartphones, tablets and other mobile devices has led to an explosion in digital advertising spending.
This is great news for media companies like Facebook, Alphabet’s Google and YouTube, and Twitter, which sell ads on their platforms.
The advent of digital and mobile technologies has opened up new opportunities for content creators and distributors, while changing consumer behavior patterns.
This has led to an explosion in streaming services such as Netflix and Hulu, which are disrupting traditional television channels like HBO and Showtime.
What should you know about entertainment stocks in 2023?
The entertainment business is incredibly varied and dynamic. Entertainment industries like movies, tv shows, music, sports, video games, and concerts are all included.
Thanks to developing technologies and rising consumer interest in media, the sector has expanded rapidly in recent years. The entertainment industry is fiercely competitive, and survival often hinges on being nimble enough to respond to shifting tastes.
The global entertainment industry is huge, and you don’t have to be particularly wealthy to invest in it
According to PricewaterhouseCoopers, the global entertainment sector was worth $2.5 trillion in 2022 and could grow to a size of $2.9 trillion by 2026.
Currently, the U.S. media and entertainment market is worth $717 billion—representing a third of the global market—and it is projected to grow to more than $825 billion by 2023.
The U.S. has the world’s most robust media and entertainment market and it is the biggest in the world today.
The biggest companies in the industry come from the U.S., namely Comcast, The Walt Disney Company, News Corporation, Time Warner, Viacom, and CBS, and these are the world’s six largest media conglomerates.
Stock in these large media conglomerates and the companies they have acquired can fetch over $200 per share on the open market.
Due to the higher share price these companies are seeking, they may be out of reach for investors on tighter budgets. This results in the general belief that only the very wealthy can benefit from long-term investing.
If you’re interested, however, you have the option for investing in fractional shares. Investors now have the option of purchasing stock “slices” rather than a full share. You can now put as little as a few dollars into your ideal companies as much as you like.
If a company you’re interested in is selling for $100 per share and you only have $20 to invest, you can now buy 20% (or 1/5 of a share) of the company.
If the stock’s value increases and you decide to sell, your gain will be proportional to the amount you initially invested.
This comes in handy if you’re eyeing a pricey share of stock but are worried about breaking the bank to make the purchase.
You can diversify your portfolio and reduce your exposure to the risk of any one stock by purchasing fractional shares of stock in multiple companies.
In other words, you can now spread the cost of a single share of an expensive stock across several smaller purchases. Purchasing fractional shares of a number of different stocks can help spread out your investment risk.
Common examples of entertainment stocks include those of well-known companies involved in film production, streaming services, and cable television.
Consistently producing commercially successful content is what makes these companies so attractive to investors. However, there are dangers associated with investing in entertainment stocks, such as shifts in consumer behavior, new regulations, and new competitors.
As with any market, if you’re looking to invest in the entertainment industry, it’s important to first do your homework on the companies you’re considering.
In addition, it’s important for those interested in the performance of entertainment stocks to keep tabs on developments and trends in the industry.
It is highly recommended to seek professional advice from a trusted financial planner should you be interested in learning more.
The entertainment industry is cyclical
The entertainment industry is cyclical, meaning that it’s closely tied to the ups and downs of the economy. During recessions, people spend less money on movies and TV shows—and they make fewer of them as well, since there is more risk for studios to greenlight projects not knowing if people are going to buy tickets or turn up to watch.
The good news is that this cycle tends not last more than three years at most, and the vice versa also happens. The more active an economy becomes, the more movies, TV shows, music, and video games are made, resulting in a more vibrant entertainment industry.
It’s hard to predict how popular movies and TV shows will be in the future.
There is also a factor of unpredictability in the market. It is very difficult to predict how popular movies and TV shows will be in the future, since these largely depend on cultural variables out of anyone’s control.
Moreover, the industry is changing rapidly. If you’re thinking about investing in entertainment stocks this year, there are some things you should keep in mind.
The competition is fierce: There are many divisions within the entertainment industry and they are all competing for viewers’ attention. A movie needs so much more than an all-star cast to succeed nowadays given the wealth of options a typical consumer has.
There is no guarantee of success for any project. Even if a company has a great idea for a movie or TV show, there’s always a chance that something else could steal away a viewer’s attention.
Given this highly competitive space, there is a lot of risk to consider as an investor.
With so many companies competing for eyeballs, it can be hard to predict what will be popular in the future, or which companies will have good growth.
The industry also tends to cycle from one type of content to another, which means that if you invest in an entertainment stock now, there is no guarantee that your investment will still be profitable later on.
Some of the biggest players are very profitable, but not all of them.
While some of the biggest players are very profitable, like the six conglomerates mentioned above, there is no guarantee all of them will be.
If you’re investing in an entertainment stock, it’s important to know which one you’re buying into so that you can make informed decisions about whether or not it’s worth your money.
You can invest in individual stocks, but there may be better options. Investing in individual stocks can be risky, and it requires a lot of research.
Luckily for investors who don’t want to spend hours researching individual entertainment companies but still want exposure to this sector’s growth potential, there are other options: mutual funds and exchange-traded funds (ETFs).
Mutual funds pool together investors’ money so that they can buy large quantities of securities such as stocks or bonds.
ETFs allow investors access through an index fund that tracks the performance of various indexes such as the S&P 500 Index (which measures returns on 500 leading American companies) without having direct ownership over any company involved within its holdings.
Instead, ETFs allow investors to own shares representing each constituent part within those indices. These can be traded on exchanges just like any other publicly traded security, hence the name.
Media and entertainment ETFs put their money into the stocks of businesses whose primary focus is on creating, selling, or distributing media-related products or services. Film and television studios, as well as newer online media outlets, fall into this category.
The future of entertainment is evolving rapidly.
As the entertainment industry continues to evolve, companies will look for ways to diversify their revenue streams.
This means that they may consider entering into new fields of business or expanding into foreign markets.
For example, Netflix has expanded its offerings from just streaming services to include original movies and TV shows, and even video games.
Companies in the entertainment industry may also want to diversify their investments in order to hedge against any potential risks associated with being dependent on one type of product or service for income generation.
It’s important to remember that the entertainment industry is changing. The internet and streaming services are taking over, which means that old-school media companies may not be able to compete.
As a result, these businesses are facing major challenges—and investors should be aware of what this could mean for their portfolios.
As an investor, it may be worth your while to keep tabs on the major trends in the industry should you invest in it. There is a lot of opportunity in an industry that is quickly changing, but there is also a lot of risk.
The future of entertainment is hard to predict. The industry is changing rapidly, and it’s unclear what will be the next big trend.
What is clear, however, is that the future will likely be more diverse and global than ever before. It will also be more interactive and personalized—consumers can expect more immersive experiences in their entertainment, with emerging technologies like virtual reality and the Metaverse.
How do I know what to invest in?
The best way to determine which stocks are worth investing in is by doing your own research. You should look at the company’s products, its market share, and its financials.
If you do not understand any of these things or need help understanding them better, there are plenty of resources available online that can help you out.
It may also be worth investing in a financial planner or wealth management specialist if you are an individual with high net worth.
The release of new content, shifting consumer preferences, and competition from other companies are just a few of the many factors that can affect the performance of entertainment stocks.
Entertainment businesses that can anticipate changes and implement them quickly stand a better chance of expanding their operations and increasing their bottom line.
Doing your homework is crucial. Create a watchlist of stocks and ETFs in the media and entertainment sectors to familiarize yourself with the theme before diving in headfirst.
Start with any stocks or ETFs that pique your interest; bookmark them without making an initial investment, and make checking in on them a regular part of your routine.
If you want to stay current, it can be helpful to follow the news and updates of relevant companies and ETFs.
If you follow the relevant market news each day, you can learn a great deal about them. Just as reading is crucial to becoming a better writer, research is essential to becoming a better investor.
When you’re trying to increase your knowledge, it helps to learn, keep track of things, and keep yourself actively involved.
Bottom line
Putting money into the media and entertainment industry is a popular choice, but how should one get started? Like investing in any other industry, learn as much as you can by delving into the specialized fields.
It is vitally important to know what you’re investing in, but it’s just as important to have realistic expectations about the risks involved. If a company has a lot of debt and little cash on hand, that could spell trouble down the road–even if they’re doing well now.
Another thing to look out for is companies that are expanding too fast or trying to do too many things at once.
You want to see steady growth over time without any major setbacks or changes in direction like shifting from film production into video game development. And remember: never invest more than you can afford to lose!
The entertainment industry is one of the most profitable, but also the riskiest, in the world and it’s growing every year.
There are many ways to invest in this sector, but it can be difficult for beginners who don’t know where to start or what types of companies offer good returns on investment.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
