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Barbie might be queen, but content is king when investing in Hollywood
July 26, 2023
Barbie and Oppenheimer may be breaking box office records right now, but Hollywood is a complex environment for investors. SUE SCOTT explains what to look for
- Movie industry a challenge for investors
- Look for innovation and strong content libraries
- Find out about Pendal Concentrated Global Share Fund
BARBIE is the biggest flick of the year, taking $US155 million in its first three days of ticket sales in the United States.
In Australia, it was the biggest opening weekend for a movie released this year — double the second best.
Investors observing the success of blockbuster films such as Barbie and Oppenheimer may be wondering how to get exposure to Hollywood right now.
But all the hype can’t hide the fact that showbiz is a complex investment environment with actors and writers strikes, a super-competitive streaming market and the potential of AI-generated content.
“For investors, it comes down to the age-old adage, ‘content is king’”, says Sue Scott, senior investment analyst for Pendal Concentrated Global Share Fund.
Sue and the team are investors in NASDAQ-listed Warner Bros. Discovery – the studio behind Barbie – as well as Netflix.
Both own large libraries of content.
Find out about Pendal Concentrated Global Share Fund
Scott believes both Netflix and Warner are well positioned for the current tough environment in Hollywood.
“Thanks to the actors and writers’ strike, the industry is going to have to rely on their content libraries.
“Warner Bros. Discovery have an extensive library of premium content from HBO, HBO Max, CNN, Turner Sports, Discovery Channel, Food Network and Eurosport. We think there’s a lot of latent value in that back content,” Scott says.
“Netflix has ten years under its belt and has the first-mover advantage in streaming. It now has a ten-year premium library built up which is exclusively theirs.”
“Both companies are also innovative around ways to drive incremental revenue beyond a movie ticket or a subscriptions or advertising,” Scott says.
“Take a look at the whole Barbie marketing campaign.”
The outlook for Netflix
Netflix’s recent June quarter results show a 5.9 million increase in subscribers since March, and more than 238 million subscribers globally, though the stock was sold off following the release.
“I thought the number were really good. Netflix has reached a point of being cash flow positive which is unlike many of their peers. And they have the content library behind them.
“Investors were disappointed about the lack of revenue growth. We think Netflix has now reached a level of maturity that you should be more focused on cash flow growth,” Scott says.
“What we want are companies that have a good library of content. Content is king. Netflix and Warner Bros. Discovery tick that box.”
About Sue Scott
Sue joined Pendal in 2016 as a senior investment analyst for the global equities team. She is responsible for global sector coverage of the technology, consumer discretionary and materials sectors.
Sue has more than 24 years of experience in the finance industry. Before Pendal she advised global and Australian investors in Morgan Stanley’s Institutional Equity Division.
Pendal Concentrated Global Share fund is an actively managed, concentrated portfolio of global shares diversified across a broad range of global sharemarkets.
Find out more about Pendal Concentrated Global Share Fund
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.
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Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at July 26, 2023. PFSL is the responsible entity and issuer of units in the Pendal Concentrated Global Share Fund (Fund) ARSN: 613 608 085. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo.
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