In their most recent teen survey installment, Piper Sandler takes a closer look at what teen’s preferences are in video and music streaming. The results are pretty much what you’d expect — Netflix (NASDAQ:NFLX) and Spotify (NYSE:SPOT) are the most popular. But how these services rank among gender and income level (or rather their parent’s income level) gives some insight as to which is better positioned for growth, and which can absorb higher subscription costs.
The survey looked at the choices of 6,000 16-year-olds across 47 U.S. states with an average household income of $66K. The majority polled were males (54% vs 44% female, 2% non-binary), located predominately in southern states (43%) followed by the Midwest (28%), West (19%), and Northeast (9%).
Among streaming services, Netflix (NFLX) is most popular with female teens who are also spending 50% more of their video consumption on the service. But while Netflix (NFLX) dominates among teen viewers, the time spent watching Netflix (NFLX) has declined marginally from last year while time spent watching Amazon Prime (NASDAQ:AMZN) increased.
While Netflix (NFLX) is currently more popular with females, the company appears to be taking steps to narrow the gap with males with more sports programming including a recent partnership with WWE. Despite the higher cost for sports, Piper believes this could ultimately serve as a tailwind to the company by luring in more male viewers.
For teens from higher-income households, Prime (AMZN) and Apple TV+ (NASDAQ:AAPL) are the favorites suggesting that these two services have much more price inelasticity than peers.
Cable TV (CMCSA, CHTR) continues to lose ground in most households with 45% of teens surveyed without cable in their homes, up from 44% a year ago and with 7% of those expected to cut the cord within the next 6 months. The survey also found that upper income households are slower to cancel cable subscriptions versus average income households suggesting that the decision to cut the cord is more of a function of cost savings than viewing preferences.
Comcast (NASDAQ:CMCSA) lost subscribers last quarter and the results spooked investors who saw the drop as cause for concern. But Seeking Alpha authors and Wall Street analysts are bullish on the stock and view it as an attractive buy at its current level.
“I’ll readily admit the loss of cable subs in a major headwind,” Seeking Alpha author Chuck Walston said. But Comcast (CMCSA) “has a very solid moat in [broadband], one that is likely to prevail for the foreseeable future,” Walston added.
As for teens, Comcast (CMCSA) and Charter Communications (NASDAQ:CHTR) are preferred by gamers with broadband speeds that can’t be matched by other services like Roku (NASDAQ:ROKU). Comcast (CMCSA) is also investing in technology that will increase upstream capacity to 6 Gbps, 3x more than currently.
For music streaming, Spotify (SPOT) is the clear favorite among two-thirds of the teens surveyed with 45% paying for a subscription, down a percentage point from a year ago. Three-quarters of teens pay for more than one music streaming service with most of the subscription dollars going to Apple Music (AAPL) and Amazon Prime Music (AMZN). This seems to be because Apple (AAPL) and Amazon (AMZN) offer subscription bundles, rather than any preference for the music streaming option. With teens from upper income households more likely to use and subscribe to Spotify (SPOT), Piper Sandler believes Spotify (SPOT) users could absorb higher prices compared to other music streaming services including Amazon Prime Music (AMZN) and Apple Music (AAPL) and with a higher ability to monetize.
Spotify is a favorite among Seeking Alpha authors as well with a majority rating it as a Buy. “I am optimistic about their growth and margin expansion trajectory in the near future from both subscribers and price,” Seeking Alpha analyst Hunter Wolf Research said, while Cavenagh Research gives Spotify a Strong Buy as their top recommendation for “potentially explosive upside,”