There's some interesting issues surrounding streaming-media companies, but they might not be the right stocks for you. Make sure you start 2013 off right and get the inside scoop on what Motley Fool superinvestor David Gardner will be buying this year. He's crushed the market in his Stock Advisor and Rule Breakers portfolios for years, and now I invite you to a personal tour of his flagship stock-picking service: SupernovaJust click here now for instant access.


Eric Bleeker: Let's talk about streaming media right now.

It is an interesting play, because I think you've got some contrasting factors on it. We've always talked about this being the death of Sirius [XM], and it's idle talk that investors think about.

One of the reasons it's not happening was partially that telecoms have gone to metered plans, so people are concerned about that. That will be a continuing theme, even with 4G rolling out, but the other thing that's always been holding them back as well, the amount of money that they have to pay for songs.

We always say they have no operating leverage. Their costs scale directly in line with their revenues. There's legislation on the table right now to change that, so I think right now with Pandora investors even, it's not that you're buying the business for what it is.

There is a huge speculative option on them being able to decrease the licensing costs per song, so all of a sudden this becomes a really interesting play for investing within the next year, not just with Pandora, but Spotify in my opinion is a far superior business. It has a much better business model. I think users are much happier with it. I'm happy to pay my Spotify fee every single month.

Andrew Tonner: Absolutely.

Eric: Even though I listen to the same eight songs.

Austin Smith: I bet you've never had a Pandora membership, though.

Eric: I never had Pandora. I do think Spotify is fascinating. I think you're on track with that. I think it has customers that are delighted, and I think you do want to watch that.

Now, the legislation and that angle of it, seeing if they can get those fees that don't scale in line with cost directly, is going to be the make-or-break decision if you're an investor interested in the streaming space.

The article The Make-or-Break Decision for Streaming Investors originally appeared on Fool.com.

Andrew Tonner has no position in any stocks mentioned. Austin Smith has no position in any stocks mentioned. Eric Bleeker, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Investing in Startups

The lucrative and risky world of startups.

View Course »

Add a Comment

*0 / 3000 Character Maximum