One Streaming Stock Just Ended Cable TV for Good

Michelangelo took four years to paint one ceiling in Rome.

One of the greatest film trilogies of all time, "The Lord of the Rings," took three years to film.

No, Rome wasn't built in a day. And still, that seems to be the entire goal of the streaming industry right now - to build Rome in a day.

According to OnePoll, the average person streams eight hours a day. This fuels a trend within streaming stocks that could double your money in a year.

Oddly, it has little to do with who produces the most, best content.

Well, it does and it doesn't...

Streaming is on the verge of killing cable. Part of that is the affordability of one subscription relative to cable.

However, once the nail is truly in cable's coffin, the cost of watching popular shows may add up. It turns out the average person has four subscriptions to cover their eight hours of streaming per day.

When it's all said and done, the market will find a way to make us pay for our consuming habits. Streaming what we want won't be "cheap" for long once cable is out the window.

Streaming stocks will fluctuate as consumers ration their subscriptions and bounce between what's "popular" across platforms.

For this reason, it's not worth handpicking a content provider to win the streaming war.

Making great art that everyone wants 100% of the time is hardly sustainable. But there's a way around this.

We've got a pick-and-shovel streaming play that wins no matter what. Now that streaming stocks are peaking, there won't be a better time to buy.

Before we get into that, here's the latest catalyst spelling death to cable.

Discovery Streaming Will End Cable for Good

Discovery Communications Inc. (NASDAQ: DISCA) just entered the streaming battle. That's the umbrella holding the Discovery Channel, History Channel, Food Network, TLC, HGTV, Animal Planet, and others.

Fans of reality TV and educational programs can stream any of these channels on demand. Who could pass up around-the-clock access to Guy Fieri?

Their content is relatively formulaic, so it's easily repeatable. And it's reality TV, so it's much easier to produce than a superhero film.

The service is also significantly cheaper than its competitors, at $4.99 with ads and $6.99 ad-free.

Apple TV+ goes for $4.99 as well. But after that, a premium Discovery subscription is only more expensive than Hulu's basic package of $5.99, still cheaper than Disney+ at $7.99.

The Discovery network gets viewers to average 75 minutes per session. One hit show, "Fixer Upper" with Chip and Joanna Gaines, gets close to 20 million views a week on television.

Now, translate that to an environment where these viewers can watch as much as they want, whenever they want.

This is the absolute death knell for cable.

Verizon Communications Inc. (NYSE: VZ) is even offering its wireless customers a free year of Discovery+ with a subscription. That could point to a streaming-only model of programming down the road.

But here's why you should think twice before investing in a single content provider...

Streaming Stocks Have a Content Problem

If you've spent three hours scrolling through Netflix (NASDAQ: NFLX) on a Friday night, you know what I'm talking about. For streaming stocks to win, they need better content, faster.

You eventually have to ask whether it's even possible to win this so-called "streaming war." At some point, it's like sending a 1,000 people to a McDonald's drive-thru asking for filet mignon.

Imagine having a new, quality series likes "Game of Thrones," "Mad Men," or "The Simpsons" pop up every week.

To be fair, some companies make it look easy.

Disney+ (NYSE: DIS) is winning in the quality department. It needs not rush to create new originals as it pulls from decades of beloved classics.

Yet, somehow, Disney also shells out for new "Star Wars" and "Avengers" franchises at a consistent pace.

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And people love them. "The Mandalorian" finale got 1.1 million views when it launched exclusively on the platform.

Disney is also Hulu's majority owner, offering a package that gives users access to all of Hulu, Disney+ and ESPN+.

Disney, no doubt, plays smart where others lack.

AT&T Inc. (NYSE: T) provides one of the best examples of a curation flub. Funneling both CBS and HBO content through HBO Max sounds like a cash cow at first. In practice, however, it looks more like a Ferrari covered in bumper stickers.

This is not much different from the "Netflix experience" of scrolling for hours, maybe finding a gold nugget once in a while.

Netflix and Inc.'s (NASDAQ: AMZN) Prime have produced some hit originals, but they are likely going to have trouble keeping up with the Disney megalith.

Time is not on their side, and even Disney has some cause for concern in the battle for eyeballs. This all ends with just a few companies spending all their money to own a very small piece of the pie.

But that's why investing in the streaming trend has never been about who can produce or own the best original content.

Instead, the real profits for investors are in the companies that make streaming possible. In fact, more competition between streamers fuels the fire.

A select few companies will sit back and laugh while content mills scramble to outdo last week's TV series.

Even if all the content gets swept under one Disney or Discovery umbrella, this trend wins out...

How to Profit When Streaming Stocks Peak

Over-the-top (OTT) streaming services almost literally hold the streaming industry in the palm of their hand. These are the Rokus (NASDAQ: ROKU) and the Amazon Fire Sticks of the world.

To be sure, this is a competitive industry as well, but less so - especially if you're Roku.

This is not a streaming service, but the platform from which you access all your streaming subscriptions. "OTT" means that the provider goes "over the top" of various other services to bring content together from different parts of the Internet.

Roku appeared to push Apple TV out of the race, as Apple announced it would focus on original content with Apple TV+, which is now available on Roku.

You see, even when the streaming industry gets more concentrated, it's concentrated inside Roku.

Meanwhile, Roku also commands 59% of the OTT market, while Amazon has around 20%. This company isn't going anywhere.

Money Morning's Bill Patalon was talking about Roku back when it traded around $30. Readers who listened would be at 1,000% gain today, as the stock hangs around $300.

This company should continue to see stable growth over the years as we transition from cable to streaming. But even if the biggest, fastest Roku gains are past, there is still one stock with no ceiling in sight.

We've talked about how Roku enables streaming services, but here's the company that enables Roku to make money...

The Streaming Stock That Makes Roku Rich

The Trade Desk Inc. (NASDAQ: TTD) doubled revenue in its connected TV segment last quarter. There's a big opportunity in this stock as society could still face lockdowns over the next year.

Digital ads are becoming increasingly personalized, and therefore more successful, with time. This is more and more the go-to for advertisers.

Money Morning's Michael Robinson recounts the growing importance of digital ads over the years. They made up only 20% of ad sales a decade ago. Three years ago, that grew to 33%. For 2020, it was 51% of the $214 billion total.

That is expected to hit 54% in 2021 - that is, 54% of a $240 billion market.

You see, the Trade Desk is a cloud-based advertising platform. Its clients can buy ads for a range of platforms, customizing their campaigns for devices and demographics, down to the finest details.

Michael says its analytics tools enable the company to reach about 580 billion eyes over 450 million devices per day.

Data never sleeps - it doesn't seem like corporations can get enough. So TTD will keep driving at better reach and precision in different markets.

For the streaming industry right now, this is huge. Not only is the streaming market on its way to max concentration, but it's also thriving in a stay-at-home market. That means more eyes for more ads from The Trade Desk.

This company recently beat Wall Street earnings expectations of $0.43 per share. It came in at $1.27 per share.

Revenue beat expectations as well, with $216 million, 32% higher than the expected $180 million.

Right now, the stock trades for $760. But Michael Robinson still thinks TTD could double in the next 18 months.

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About the Author

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

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