With remarkable speed, the COVID-19 pandemic has accelerated select investment themes across a number of industries. In my view as an equity analyst, nowhere is that truer than the media and entertainment sectors where technological advances and work-from-home trends are rapidly changing the landscape.
Structural shifts in media consumption are disrupting the business models of traditional media giants with consumers increasingly moving away from using cable connections and towards streaming video services and interactive forms of entertainment. The resulting shift in viewership habits, especially among young people, could profoundly alter the investment outlook for media companies in the years ahead.
With that in mind, here are five powerful themes that I believe will play a major role in the evolution of media and entertainment over the next decade.
1. Video games will surpass pay TV as the largest in-home entertainment market.
Video games should enjoy at least another decade of demographic tailwinds generated by young people playing and spending more, and older people continuing to stay in the game, so to speak. Dramatic advancements in graphics quality, increased access to cloud-based gaming platforms, and the further adoption of in-game monetization should allow video games to continue taking time and wallet share from traditional pay TV companies.