Streaming services provider Netflix made an agreement with the federal government involving a $500 million investment to produce original Canadian content. As streaming services slowly gain traction across the globe and threaten traditional media providers, will this lead to investors ditching their shares in media firms?
Ambrose O'Callaghan of The Motley Fool Canada examined how the Netflix foray in Canada is affecting these traditional providers and said there is no doubt that consumers are turning to streaming services for their media consumption.
For instance, recent figures show that Toronto-based Corus Entertainment stock was down 5.4% month-on-month. Whilst this broadcasting company has a strong presence in the children’s entertainment space, the younger generations are now starting to shift to streaming. The firm owns specialty channels such as YTV, Disney Channel, and Nickelodeon.
Walt Disney announced in August that it would pull its content from Netflix as it eyes launching its own streaming service. It stated that it would avoid extracting Marvel content, which suggests that its new streaming service would be geared towards the younger consumers.
"This should make traditional providers like Corus nervous for the future. Much of its recent growth has been due to larger acquisitions, and its concentration on a younger demographic could clip its wings and its 8% dividend yield," O'Callaghan said.
The entry of Netflix came with the concerns of imposing a tax on such streaming services. Quebecor Founder Karl Péladeau has been outspoken on the Netflix deal. He noted that the Canadian policy has, in a way, subsidised digital giants like Netflix and Amazon and seemingly advocated for the sales tax.
Whilst the said concerns were dismissed on a wider scale, the Quebec provincial government is steadfast in seeking to impose a sales tax on such providers.
O'Callaghan mentioned that Quebecor stock managed to increase by 27% in 2017, with revenues jumping by 4% to $1.03 billion.
"I like Quebecor to continue its robust growth with provincial support. Corus, however, is likely to face threats to its growth potential and dividend yield as streaming services become more prevalent in Canadian households," she said.
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