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ETFs in Focus as Netflix Bags Global Rights for Seinfeld

Sweta Jaiswal, FRM

In order to meet the increasing competition in video streaming, Netflix NFLX recently added all 180 episodes of the Emmy-Award winning sitcom Seinfeld to its content portfolio for five years, beginning 2021.

Notably, nearly two decades after the finale was aired in May 1998, the streaming rights to Seinfeld were most sought after. In fact, the streaming giant was competing with a large number of bidders like Comcast’s CMCSA NBCUniversal, AT&T’s T WarnerMedia, Hulu and Amazon AMZN for Seinfeld's global streaming rights.

Netflix has planned to provide complete 4K resolution support for Seinfeld's Netflix run. The popular sitcom will be available on Netflix in the United States, after the end of Sony Pictures Television’s current deal with Hulu in June 2021. It is being speculated that Hulu has shelled out somewhere between $160 million and $180 million per year for the series' domestic streaming rights under its previous five years deal. However, the terms of this new deal by Netflix have been kept under wraps. Notably, the streaming giant will also expand the show’s footprint globally, although it is currently available on Amazon Prime (read: Sector ETFs, Stocks Set to Explode After Another Rate Cut).

A Comeback Deal for Netflix?

Netflix had disappointed investors by losing U.S. subscribers for the first time in eight years in last quarter’s earnings and missing targets for overseas customers. Moreover, it recently lost streaming rights of two of its most popular third-party shows — Friends and The Office to WarnerMedia’s HBO Max and NBCUniversal’s Peacock, respectively.  In fact, HBO Max has also earned exclusive rights for streaming series like Dr. Who, Luther, and Top Gear following a deal with BBC America.

Demand for the old-school shows like Seinfeld remains high in the market as these are most popular among the viewers aged below 35 years whose viewing of broadcast and cable TV  has fallen drastically over the last five years. In fact, per recent content ratings data from Nielsen, majority of the top 20 shows streamed on Netflix in the United States in 2018 were old-school hits like The OfficeFriendsGrey’s Anatomy and NCIS.

Thus, the deal with Sony Pictures Television can also be a gamechanger for Netflix in the wake of increasing new entrants in the streaming space.  Apple TV+ AAPL and Disney+ DIS are ready to begin the battle for streaming market share by hitting the market soon. Moreover, with a huge library of popular content, HBO Max and Peacock will be kicking off the battle in spring 2020 (read: 5 ETFs to Ride on Highest Core U.S. Inflation Rate in a Year.)

ETFs in Focus

Below we have highlighted the ETFs having higher allocation to the online streaming giant in detail and investors should closely monitor the movement in these funds:

Invesco NASDAQ Internet ETF PNQI

This fund offers exposure to the largest and most liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. It holds about 83 stocks with Netflix taking the fifth spot in its basket with 6.2% allocation. Internet & direct marketing retail services dominates the portfolio with 40.4% share in the basket, closely followed by Interactive media & services at 31.9%. The product has AUM of $545.4 million and trades in a lower volume of about 17,000 shares a day. It charges 60 basis points (bps) in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Ride the Millennial Wave With These ETFs).

First Trust Dow Jones Internet Index FDN

This is one of the most popular and liquid ETFs in the broad tech space with AUM of $8.34 billion and average daily volume of around 454,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 52 bps in fees per year. Holding 42 stocks in its basket, Netflix occupies the seventh position at 4.7%. The product has a Zacks ETF Rank #2 with a High risk outlook (read: Beaten-Down, Top-Ranked Tech ETFs to Buy Now).

iShares Evolved U.S. Media and Entertainment ETF IEME

This newly actively managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 89 stocks in its basket, Netflix occupies the fourth position in the basket with 4.5% share. The fund has accumulated $5.6 million in its asset base and charges 18 bps in annual fees. It trades in a paltry volume of around 3,800 shares (read: CBS, Viacom to Merge: Media ETFs in Focus).