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Investing in entertainment stocks
While game sales thrive, the movie industry and other companies struggle amid pandemic fallout.
Entertainment stocks can be a playful addition to any portfolio, representing the best of companies Canadians use to tune in, tune out and otherwise amuse ourselves. They can be lucrative for investors, though vet your options as the continuing pandemic drags down consumer trends.
What are entertainment stocks?
Entertainment stocks are from companies that fall within the entertainment industry — a subsector of the communication services sector as defined by the Global Industry Classification Standard.
These stocks belong to companies that keep the world entertained, spanning forms of at-home and on-the-go amusement across:
- Video games (PC, console, handheld devices etc.)
- Television
- Film
- Music
- Publishing (books, ebooks, newspapers, magazines, comics etc.)
- Radio
Film studios, broadcasting companies, event venues, cable and satellite companies, movie theaters, book publishers and even bowling alleys and bouncy castles all fall within the investment market’s media and entertainment sector.
How to invest in the entertainment sector
Invest in the entertainment industry by purchasing stocks or exchange-traded funds (ETFs).
Individual stocks from companies in the entertainment sector offer the opportunity for a targeted investment — you can pick and choose which businesses you want to back. They can be profitable but volatile, with price fluctuations throughout the trading day.
ETFs offer a more diversified investment opportunity, because they track collections of stocks and offer exposure to a wider swath of companies. They come with greater stability than stocks, but also expense ratios that typically range from 0.03% to 2.5%.
Whether you opt for stocks, ETFs or a combination of the two, you’ll need a brokerage account to invest:
- Pick a platform. Compare trading platform features and fees to find a broker that can help you reach your investment goals.
- Open an account. Complete applications for web-based brokerages online with basic personal information, like your residential address and Social Security number.
- Fund your account. Transfer funds from an external bank account to begin trading.
- Select your securities. Filter stocks and ETFs by sector or industry to narrow down your options.
- Place an order. Once you’ve found a stock or ETF to purchase, submit your order.
- Monitor your investments. Log in to your brokerage account to stay on top of your investments.
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What stocks are in the entertainment sector?
Video games
- Nintendo Co., Ltd. (OTC Markets Pink Sheets: NTDOY, TYO: 7974.T)
- Electronic Arts Inc. (NasdaqGS: EA)
- Sony Group Corporation (NYSE: SONY)
Television
- ViacomCBS Inc. (NasdaqGS: VIAC)
- Netflix, Inc. (NasdaqGS: NFLX)
- BCE Inc., Bell Canada Enterprises (NYSE: BCE, TSX: BCE.TO)
Film
- The Walt Disney Company (NYSE: DIS)
- Sony Group Corporation (NYSE: SONY)
- Cineplex Inc. (TSX: CGX)
Music
- Sony Group Corporation (NYSE: SONY)
- Warner Music Group Corp. (NasdaqGS: WMG)
- Tencent Music Entertainment Group (NYSE: TME)
Radio
- BCE Inc., Bell Canada Enterprises (NYSE: BCE, TSX: BCE.TO)
- Sirius XM Holdings Inc. (NasdaqGS: SIRI)
- ViacomCBS Inc. (NasdaqGS: VIAC)
Publishing
- Scholastic Corporation (NasdaqGS: SCHL)
- Meredith Corporation (NYSE: MDP)
- Transcontinental Inc. (TSX: TCL-A.TO, OTC Markets Pink Sheets: TCLAF)
What ETFs track the entertainment sector?
Major funds that track the entertainment sector include:
- Evolve E-Gaming Index ETF (TSX: HERO.TO)
- Global X Video Games & Esports ETF (NasdaqGS: HERO)
- Invesco Dynamic Leisure and Entertainment ETF (NYSEArca: PEJ)
- Invesco Dynamic Media ETF (NYSEArca: PBS)
- Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSEArca: NERD)
- iShares Evolved U.S. Media and Entertainment ETF (BATS: IEME)
- VanEck Vectors Gaming ETF (NasdaqGS: BJK)
- VanEck Vectors Video Gaming and eSports ETF (NasdaqGS: ESPO)
- Communication Services Select Sector SPDR Fund (NYSEArca: XLC)
Why invest in the entertainment sector?
Despite the COVID-19 pandemic, many companies in the entertainment industry are thriving — especially streaming and video game platforms. Here’s a quick look at some of the facts:
- Music recording & streaming. Global revenue from music recording has declined slightly over the last 20 years, with $23.4 billion made in 2001 and $20.2 billion made in 2019. Canadian music publishing generated $277 million in 2020 down from $572 million in 2018. The drop was likely due to the economic impact of COVID-19.
- From physical music to streaming. Over the last 20 years, global revenue from physical music sales (CDs, records etc.) has declined dramatically while digital music revenue has increased, peaking around 2013-2014. Today, the majority of global music revenue comes from streaming services.
- Gaming. Combined revenue from the global PC and mobile gaming markets for 2020 is estimated at nearly $114 billion, according to Statista.
- Film & TV. The US has one of the most prolific film industries in the world, generating $35.3 billion in revenue in 2019. Canadian film and TV productions generate around $5 billion in annual revenue. Global video streaming was valued at USD $50.11 billion in 2020. Despite strong competition from streaming services, movie ticket sales in both Canada and the US amounted to USD $2.2 billion in 2020.
- Radio. In 2018, private commercial radio sales in Canada generated $1.5 billion in revenue.
- Publishing. The global book publishers market was worth $92.8 billion in 2019 and was expected to dip in 2020 due to COVID-19. Surprisingly, book sales were strong towards the end of 2020 and are expected to reach $91.4 billion in 2023.
Entertainment may be a consumer luxury — but it’s a profitable luxury. Plus, entertainment stocks offer investors the opportunity to back companies they interact with every day. There’s something to be said for investing in what you know.
What unique risks does the entertainment sector face?
The coronavirus pandemic is having a debilitating effect on many sectors of the economy, with entertainment stocks no exception. While some companies and categories have found a profitable way to navigate the tenuous market conditions, appealing to the needs of consumers stuck at home, other companies are beginning to flounder — and even sink.
Many analysts are optimistic the economy will rebound — and with it, consumer spending habits. But there’s no guaranteed timeline for this recovery, and some companies in the entertainment industry may never bounce back.
It’s also hard to gauge the pandemic’s impact on how we prefer to be entertained. Movie theaters are crippled by the pandemic, leaving streaming services to fight tooth and nail for a slice of the market. It may be many years before we fully grasp the long-term effects of COVID-19 on the entertainment industry, or before movie theaters are packed once again.
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Bottom line
The entertainment sector has performed well in the past and gives investors a chance to back companies most of us use every day. But time will tell how the coronavirus pandemic continues shaping the way we amuse ourselves.
Explore your brokerage account options to find the account best suited to meet your investment goals.
Frequently asked questions
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
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