Hollywood has changed dramatically over the past decade, as the number of moviegoers has declined with the rising popularity of streaming services from Netflix, Inc. (NASDAQ:NFLX), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN). Rapid evolution in home entertainment technology has also helped, with TVs constantly becoming bigger and sharper and surround sound systems becoming crisper and clearer.
Why go to the movie theater when you can just stay at home?
All these things have slowly eroded what we call “Hollywood.” Meanwhile, a giant cultural shift has been making its way into the film space. What was once seemingly forbidden and taboo is now more openly accepted, with social demands for diversity in films increasing and becoming the norm.
But perhaps the biggest and most recent occurrence to rock the industry?
The mounting accusations of sexual harassment towards Harvey Weinstein. This is just the beginning — countless megastars have been cast under the same shadows, with Kevin Spacey being the latest to get the brunt of negative press. There will doubtlessly be more stories; more actors that lose their jobs and the respect of fans.
But the latest turmoil could very well be the biggest catalyst for “New Hollywood:” changes in the mentality surrounding filmmaking, changes in those who partake in the filmmaking process and changes to how and where films are viewed. With the institution under attack and change being inevitable, a perfect opportunity for some stocks to flip the Hollywood script arises.
With that as a backdrop, I’d like to discuss stocks to buy and sell amid the changes in Hollywood. The list includes popular streamers, movie theater stocks and another name that could be more broadly affected by the changes in the industry.
New Hollywood Stocks to Buy: Netflix (NFLX)
Right now, NFLX might seem like an odd pick for stocks to buy with the rise of New Hollywood. After all, Kevin Spacey, who starred in the Netflix Original Series House of Cards, is the latest star to experience Weinstein-esque judgement. Anything resembling his — or Weinstein’s — behavior is counter to the shift in cultural expectations that embodies the New Hollywood movement.
However — singular incidents aside — when you look at the bigger picture, Netflix is actually in a prime position to redefine Hollywood. Not only is it at the head of the cord-cutting movement that has wreaked havoc on movie theaters, but it is now developing its own original films. 80 films in 2018, to be exact.
With the original Hollywood mindset in place, Netflix-exclusive films stood seemingly no chance at gaining the same level of respect and awareness as those produced by traditional studios. But with Hollywood in self-destruct mode, a new space to work in could be embraced by actors and actresses far more easily than before. Hollywood is becoming a dirty word; Netflix, much less so if it can squelch the Kevin Spacey controversy.
The key here is for Netflix to embrace its distinction as an “outsider,” while maintaining a high level of quality.
As of now, none of the Netflix original films have reached Hollywood-Blockbuster status, but the more it produces new content and the more the public loses faith in Hollywood, the greater its chances are for it to become a respected filmmaking destination. Combine that with the stock’s already consistent growth story, and it’s easily one of the best stocks to buy in the New Hollywood world.
New Hollywood Stocks to Buy: Amazon (AMZN)
Like Netflix, AMZN isn’t devoid of controversy in the New Hollywood movement. But the bigger picture does play in its favor, assuming it can escape any short-term PR nightmares.
As a valid competitor to Netflix in the video streaming space, AMZN also stands to benefit from New Hollywood in the same way. But there are still a few other aspects that set it apart. First of all, the fact that it is a far more diversified stock. Amazon isn’t just a streaming and content creation company like Netflix; it develops its own hardware, the buyout of Whole Foods has made it a grocer and it has long been the dominant “e-tailer.”
For those looking for a more direct play on New Hollywood, NFLX might be the better pick; however, those looking for a little more reliability could choose AMZN stock instead. Also, Amazon’s experience with hardware could give it an advantage later on, as the way we view cinema in the living room is continuously changing. Who knows what kind of technology it could come up with next? Or maybe an evolution to the Amazon FireTV will help set Amazon Video apart from other streaming services? And Amazon also owns Twitch, a video streaming service that’s popular with video game streamers.
Some of its distinguishing qualities are more speculative, but given AMZN stock’s involvement in a variety of industries, as well as the company’s competent exclusive streaming content, investors can make a less risky play on the New Hollywood movement with this stock to buy.
New Hollywood Stocks to Buy: Alphabet Inc (GOOG)
When you think of Hollywood, you probably think of stars like Jennifer Lawrence, Leonardo DiCaprio, Christian Bale and countless others. But if you have a decent video camera and audio setup, you can also become a star. That’s one of the appeals of Alphabet Inc’s YouTube.
Although other social media platforms like Facebook Inc’s (NASDAQ:FB) Instagram give users a space to show off extravagant lifestyles through tons of “filtered” pictures, YouTube remains the de facto leader when it comes to video.
YouTube and Google are both key parts of the social media ecosystem, where users use the standout aspects of differing platforms to express themselves fully online.
Although YouTube videos will never overtake film as an art form, its users can find visual entertainment that no Hollywood movies offer. Whether it’s watching popular users play video games or a simple tutorial on how to change your oil, YouTube offers unique experiences with the option of communal interactivity.
Look for more people to take a break from the movie theater and all the drama surrounding Hollywood and spend more time on GOOG’s “homegrown” platform in the years ahead. In fact, the amount of time users spent watching videos on YouTube has grown 60% year-over-year. This alone demonstrates users’ strong interest in the content on its site.
New Hollywood Stocks to Sell: Regal Entertainment (RGC)
With those three stocks to buy out of the way, it’s time to consider the stocks to sell with the rise of New Hollywood. Here, I’ve decided to place Regal Entertainment Group (NYSE:RGC) in the spotlight, though several other movie-theater stocks (for example, AMC Entertainment Holdings Inc (NYSE:AMC) ) could easily take its place.
Unless you’ve been living under a rock, it should be no surprise that movie theaters haven’t been doing so hot lately. Although superhero movies, animated children’s films and the occasional sci-fi flick continue to be big box-office hits, recent high-profile flops like Blade Runner 2049, starring actors Ryan Gosling and Harrison Ford, should make investors worry about the current state of Hollywood. Outside the limited arsenal of sequel-ready superhero flicks, what else can Hollywood come up with that will draw the attention of the average theater-goer?
Add to that the revelation that the first post-scandal Weinstein Co. film grossed only $742, which has led to another film being pulled from release, and you have to wonder how many other films might be effected as more actors, directors and producers get slammed with allegations of sexual misconduct.
But going beyond speculation, the fact remains: “The summer box office of 2017 was the worst in a decade.” There are a few likely mega-hits coming around the corner — does anyone really expect the new Star Wars film to flop? But when you add it all together, movie theater stocks like RGC (which is already down more than 30% in the past year) are set for a rough ride in the New Hollywood era.
New Hollywood Stocks to Sell: World Wrestling Entertainment (WWE)
My final pick, World Wrestling Entertainment, Inc. (NYSE:WWE), is probably the strangest and most speculative of the bunch. Besides a few WWE-led films and a few WWE superstars who have made their way into Hollywood cinema, what else does the WWE have to do with the rise of New Hollywood?
In this case, it’s less about the filmmaking industry and more about the controversy Hollywood is currently experiencing. Every day I visit a news site, I see a new story about sexual harassment involving people I’d never suspect. But when it comes to the WWE, its workplace culture is ripe for trouble after the Weinstein expose. All you need to do is YouTube a few “shoot” interviews with wrestlers and you’ll quickly realize that the wrestling business is notorious for its sex scandals.
As seen with the Weinstein case, it only takes a few strong voices to cause massive damage. And as this story continues to gain momentum (along with any other Hollywood scandals), the more significant such cases will become to companies not directly related to the filmmaking industry.
With that in mind, WWE is a stock I’d be hesitant to put my money on in the age of New Hollywood.
Robert Waldo is an Assistant Editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.