Thursday, 4 July 2024 Reading time : 3 minutes

Live television remains the most popular form of entertainment in Switzerland. According to the Swiss Electronic Media Association (IGEM), 6.3 million Swiss people say they watch television at least occasionally. But it comes at a price: households pay a cable fee of around CHF 38 per month, plus radio and television licence fees (Serafe). At the same time, commercial breaks take up time and viewers are tied to fixed times. Yet, people have a great need for flexibility – today more than ever. TV providers are already meeting this need: today, it is possible to tune in via livestream from anywhere in Switzerland. In some cases, the program can also be viewed in media libraries.

In Germany, too, traditional television is highly valued, although its popularity has declined in recent years. Streaming services and on-demand platforms such as Netflix are becoming increasingly popular, especially among the younger generation. According to Stiftung Zukunftsfragen, 75% of 18 to 35 year olds watch streaming services on a weekly basis.

The Amazon of movies
Globally, Netflix is the leader in streaming services and, according to the company, has more than a quarter of a billion subscribers these days. But Netflix did not start off as a streaming platform. Originally it set out to become the Amazon of movies, launching a subscription service that allowed US customers to rent movies. The rental service was successful, and at its peak it was shipping over a million DVDs a day to around 16 million subscribers. In 2007, Netflix launched its streaming services. While this business grew in the following years, the DVD business shrank and was finally discontinued in 2023. Today, the streaming platform and its original productions reach subscribers in more than 190 countries, with Netflix producing numerous blockbuster series – those without Netflix may feel excluded from many discussions. 

Still, the company has had its problems in recent years. Users repeatedly shared their accounts – many people were streaming, but few were paying. So, in 2023, Netflix announced the end of the password sharing era. Members today have to log in from their home IP address at least once every 31 days, otherwise they need be added as an additional member for a fee. In addition, the range of payment options has been expanded so that customers can continue to use Netflix for a low fee. The changes have put Netflix back on track, with net income increasing by over 20% in 2023.

Cloud providers play key role
One of Netflix's biggest rivals is Walt Disney. Its Disney+ and Hulu streaming platforms together have more than 160 million subscribers, according to the company. But Disney's reach goes beyond that. The entertainment company also operates linear networks and sells its content to third-party broadcasters. In addition, Disney is a major shareholder of National Geographic, operates resorts and adventure parks, licenses its characters for consumer products, and distributes its products through its own stores.

Amazon Web Services, Amazon's cloud services provider, hosts both Disney and Netflix in its cloud. This means that the movies and TV shows we access are stored in Amazon's data centers, ensuring fast loading times. For example, when a new series is released, the increased demand needs to be managed, and resources need to be used efficiently so that subscribers can stream without interruption. Cloud providers like AWS are therefore essential for streaming services.

Investment idea
The Barrier Reverse Convertible on Disney, Netflix and Amazon has a barrier of 59% and pays a guaranteed coupon of 12.00% per annum.

BRC on Disney, Netflix, Amazon

Termsheet (Valor: 135 803 430)

Indicative terms 

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements. The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document. If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.