Looking for the best entertainment stocks to invest in? Find out some of the top options plus the benefits and drawbacks of investing in superstar entertainment shares.
Entertainment is one of the most enduring human pursuits. It’s thrived across millennia continually reshaping itself amidst shifts in culture and technology. This adaptability combined with growing consumer demand has turned it into a multi-trillion-dollar global industry, where traditional forms like theatre coexist with modern phenomena like streaming services and video games.
Investors have a great opportunity to profit from this sector’s sustained growth and evolution. Below, we highlight some standout entertainment stocks that are capturing the market’s attention and that may be worth considering for your portfolio.
What are the best entertainment stocks?
This sector constantly shifts and finding the best entertainment stocks can feel like trying to shoot arrows at moving targets, on horseback, while filming a blockbuster Western film. To give you some starting inspiration for action, we’re shining some lights and cameras on these top entertainment stocks from the MSCI World Media and Entertainment Index:
As the name suggests, entertainment stocks are shares of businesses that operate within the entertainment industry. These are companies that specialise in delivering various forms of enjoyment, amusement and leisure to consumers.
Types of entertainment stocks
The entertainment industry is very diverse, and investors have plenty of options to choose from. Here are some of the main choices:
Film and television production and distribution. These companies are involved in the creation and distribution of movies and television shows. Examples are Warner Bros. Studios and Universal Pictures.
Streaming services. This category includes companies that provide digital streaming of entertainment content, including movies, TV shows and music. Key examples are Netflix, Hulu and Spotify.
Broadcast and Cable Television. These are traditional media firms operating television networks and cable services. Paramount Global, Comcast and ITV are three major examples.
Music production and distribution. These companies are involved in music production, publishing, and distribution. They include record labels like Universal Music Group.
Video game publishers and developers. This sub-sector includes businesses developing or publishing video games. Firms in this category may also be involved in esports and other gaming-related activities. Some of the leading names here are Activision Blizzard, Electronic Arts and Nintendo.
Theme parks and live entertainment. This entails companies that operate theme parks, amusement parks and live entertainment venues. Disney is a notable leader in this space.
How to invest in entertainment stocks
Open a sharing-dealing account. The first step in investing in entertainment stocks is to open a share trading account. Choose a platform that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface.
Fund your account. Once your account is set up, proceed to fund it. You can do that via a bank transfer, debit card or any other means allowed by your share-dealing platform.
Research and choose entertainment stocks. Research the best entertainment stocks for your portfolio and then search for them on your chosen platform. You can search by company name or ticker symbol.
Buy shares. Once you’ve found the entertainment stock you’re interested in, select the amount you want to invest and hit “buy.” And just like that, you’re now officially an investor in the entertainment sector.
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Why do people want to invest in entertainment stocks?
Investors are drawn to the entertainment sector for various reasons, including the glitz and glamour of its substantial growth prospects. Global spending on entertainment is expected to hit $2.78 trillion by 2027, up from $2.32 trillion in 2022.
The emotional connection people have with entertainment brands is also often a strong motivator. Investing in companies that produce beloved content or memorable experiences gives investors a chance to kill two birds with one stone – become part of the brand’s story and evolution while potentially enjoying financial gains.
Advantages of investing in entertainment stocks
Here are some of the best blockbuster benefits that may get you hyped up about the prospect of investing in entertainment stocks:
Diversity. Because it encompasses a wide range of segments, from film production to digital streaming to video games, the entertainment industry offers an excellent means of portfolio diversification.
Resilience. While not completely impervious to market fluctuations, entertainment stocks often demonstrate resilience during economic downturns. People tend to turn to entertainment as a form of escapism during tough times, which can sustain industry revenues even in challenging economic climates.
Dividends. Some of the best entertainment stocks provide dividends, offering a steady income stream to investors.
Brand loyalty. Many entertainment brands enjoy strong consumer loyalty, which can translate to more stable financial performance.
Risks of investing in entertainment stocks
Away from all the bright lights and excitement, there are still potential drawbacks to consider if you’re thinking about investing in entertainment stocks:
Technology and consumer attitudes. Constant technological innovation, as well as shifts in cultural trends and social norms, can disrupt existing business models, impacting company performance and stock value.
Illegal activity. Piracy and challenges in protecting intellectual property can lead to revenue losses for entities in the entertainment industry.
Competition. This industry is highly competitive, with constant pressure to innovate and capture the audience’s attention.
Unpredictability. Success in the entertainment industry can be highly dependent on producing hit content, leading to unpredictable earnings even for the best entertainment stocks.
Our expert says: What do future prospects look like for entertainment stocks?
"There’s plenty of positive tailwinds across this sector. The popularity of streaming services along with the continued expansion of the video game industry is opening up even more doors for investment opportunities.
However, entertainment stocks seem to get heavily punished for the slightest drop in growth, and most businesses can’t keep growing forever. There are also some areas within entertainment, like amusement parks for example, that aren’t as successful as they once were. I think there’s plenty of opportunity among entertainment stocks but it’s a cut-throat and ruthless business sector."
Alternative ways to invest in entertainment stocks
Other than investing in individual stocks of companies in the entertainment sector, there are other alternative ways of gaining exposure to this industry. Here are some of your options:
Index funds and exchange-traded funds (ETFs). Investing in ETFs or index funds focused on the entertainment sector is a viable alternative to buying individual stocks. These funds represent a collection of various entertainment-related stocks, providing broader industry exposure and potentially reducing risk through diversification.
Investment funds. Here, a company pools money from individual investors and then invests it in a diversified portfolio of stocks. Investors have to pay a fee, however, for having someone else manage the investment for them.
Investment trusts. These work in a similar manner to funds, with one major difference. While funds are open-ended, allowing continuous trading of stocks and investor withdrawals, investment trusts are closed-ended. The funds are locked in, which allows a more long-term approach.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Pros and cons
Pros
It’s an industry with huge growth prospects
Proven resilience, even during economic downturn
There’s a wide variety of stocks to choose from
Cons
Risk of obsolescence due to rapid technological changes or shifts in cultural trends
Constant need to keep innovating or producing hit content
Ongoing threats like IP theft can impact the profitability of even the best entertainment stocks
Bottom line
The entertainment industry is a dynamic and potentially lucrative sector for investment. It’s worth a look for investors seeking good wealth-building options. However, as with any other investment, thorough research, a clear understanding of your risk tolerance, and a long-term perspective are important. Plenty of the best entertainment stocks may look shiny on the surface, but always dig deeper and think about the future prospects.
Frequently asked questions
Investing in the entertainment industry can be profitable, especially if you choose stocks with strong fundamentals and you manage your investments wisely. Remember that all investments carry the risk of financial loss, however.
Investing in entertainment stocks offers opportunities for significant growth and portfolio diversification. It’s an interesting and fast-moving sector that captures the attention of people all around the world.
The main risks of investing in entertainment stocks are technological and cultural disruptions, dependency on hit content, and intense competition, all of which can impact a company’s profitability and, by extension – stock performance.
Entertainment stocks can be a good choice for long-term investment, especially if you invest in companies with strong fundamentals, a history of steady growth, and that have proven to be adaptable to changing market dynamics. However, these stocks should be balanced with others from different industries to manage risk.
Sean LaPointe is a seasoned freelance writer who specialises in finance, tech, and business. He excels at finding practical solutions to everyday financial problems and has written for a wide range of top sites including The Motley Fool, Angi/HomeAdvisor, Best Money, CapLinked, and Valutico.
When he’s not writing or researching new ways to help people manage their money, he can be found playing basketball with friends or spending time with his family. See full bio
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