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Covid-19: Country Lockdown Boosts Streaming Video Demand

With more and more people sheltering in place, viewers are killing time by binge-watching.


Schools are closing, businesses are closing down, and governments far and near are telling people to stay at home. While some consumers are still able to practice social distancing, an growing majority are being asked to quarantine themselves, to shelter in place,  or are being placed on lockdown as a result of the SARS-CoV-2 virus that triggers COVID-19 coronavirus disease.

There have been anecdotal reports indicating that viewership on streaming platforms has risen as a result of stay-at-home and work-from-home trends. Now a study released by television ratings specialist Nielsen uses previous data to extrapolate that streaming video consumption could see a much growing rapidly in demand during the lockdown than many are anticipating and several stocks could be huge beneficiaries as a result.

The data suggests a near-60% jump in demand

Nielsen released a report early this week, titled Staying Put: Consumers Forced Indoors During Crisis Spend More Time on Media. The headline finding was that “staying put in our homes can lead to almost a 60% increase in the amount of content we watch.”

The report analyzed facts from two recent crises to highlight this point. During the 2016 blizzard (Snowpocalypse) in New York, total TV usage (TUT) in the region increased by 45%. Around the same time, video streaming soared 61% as audiences bundled series and watched movies to spend time sequestered around home. Nielsen reported a similar trend during Hurricane Harvey in Houston in 2017, as TUT increased by 56%.


Finally, the European Union (EU) has contacted a number of streaming video providers asking them to reduce streaming quality from high definition (HD) to standard definition — especially during peak use periods, to reduce the burden on broadband data infrastructure. That’s the clearest indication that streaming demand is growing.

Based on that anecdotal data analysis, here are three stocks that will likely benefit from sheltering at home.

1. Netflix

There is a definite advantage to being the King of the Hill, and Netflix (NASDAQ: NFLX) is the undisputed champion. The streaming pioneer closed 2019 with more than 167 million subscribers paying, up 20% year-on-year. That increased revenue by 31%, and earnings per share increased by 333%. It is also important to remember that this was before the widespread spread of coronavirus pushed people into their homes to ride out the storm.

Netflix was already guiding for 17% growth, with its subscriber count growing to 174 million in the first quarter, but it now appears that could be a conservative estimate. There’s since been additional data that suggests that Netflix’s subscriber counts are growing faster in the face of all the lockdowns, but we won’t know for sure how much demand has increased until Netflix reports first-quarter earnings on April 21.

One more thing: During the stock market crash that accompanied the Great Recession of 2008-09, the S&P 500 index lost 56% of its value between Oct. 31, 2007, and March 9, 2009. At the same time, Netflix stock gained 45% as consumers sought an inexpensive refuge from the ongoing financial crises.

2. Alphabet

Parent company Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) may not be the first name you think of in streaming video, but YouTube under Google has a clear advantage, particularly among younger viewers. The fall 2019 version of Piper Jaffray’s Taking Stock with Teens survey found that 37% of teens’ daily video consumption is done on YouTube, slightly ahead of 35% for Netflix. That marked a changing of the guard, as YouTube had long trailed Netflix in previous surveys.  

YouTube was also one of the services that responded to the EU call to speed up streaming, indicating that young people spend more time on the site. There are other reasons to buy Alphabet’s stock during this meltdown. First, internet use in general and search in particular will also spike as the crisis deepens, as consumers seek out the latest information as events unfold, and Google search is the undisputed leader. The company will no doubt take a hit to revenue, as marketing budgets are typically among the first to be slashed during a downturn and Google gets the bulk of its revenue from advertising. Fortunately, Alphabet also has a rock-solid balance sheet that will help it weather the storm, with cash and marketable securities of almost $120 billion, but less than $5 billion in long-term debt.

The need for streaming and search will spike during this crisis, making it a good time to buy Alphabet.

3. Amazon

E-commerce giant (NASDAQ: AMZN) has long held the top spot in streaming video through its Prime Video streaming site. The company has more than 150 million paying Prime subscribers, but Amazon has been shocked by how many of those subscribers use streaming content on a daily basis. Whatever the number is, it is likely to increase as viewers continue to broaden their options during the extended lockdown.

Amazon was also among the companies called upon by the EU to reduce video quality in order to reduce the burden on the internet infrastructure. Moreover, as people are reluctant or even discouraged from leaving their homes, Amazon is providing a much-needed pipeline for household goods. Earlier this week, the company announced that it would stop taking non-essential products at its warehouse to concentrate on consumer goods and medical supplies.

The move came after Amazon had experienced a shortage of many household items in the wake of major online shopping as consumers stayed indoors. To more and more shoppers planning a weekly trip to the grocery store and hunkering down, the King of e-commerce will remain a port throughout the storm.

Amazon also has a solid balance sheet, with more than $55 billion in cash and marketable securities and just $23 billion in long-term debt. Since Amazon will provide both entertainment and needed supplies, buying its stock is almost a no-brainer.

The source is here.

Enterprise Mobility Strategist & Mobile Security Specialist

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