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Roundhill Launches Streaming Services ETF

The issuer's latest themed offering follows up on the success of NERD and BETZ.

Roundhill Investments, the company behind the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD) and the Roundhill Sports Betting & iGaming ETF (BETZ), is bringing a brand new themed ETF to the marketplace.

The Roundhill Streaming Services & Technology ETF (SUBZ) is designed to offer investors exposure to companies from across the globe who are actively involved in the business of streaming. That can consist of companies that operate direct-to-consumer streaming services including video, audio, livestreaming as well as companies that create infrastructure or technology necessary to facilitate streaming.

SUBZ is actively managed and the fund's holdings are determined on the basis of exposure to the theme of streaming.

Roundhill Streaming Services & Technology ETF (SUBZ)

Roundhill Streaming Services & Technology ETF (SUBZ)

The opportunity in streaming has grown exponentially over the past decade and continues to evolve around the world. It's clear that consumers continue to move away from traditional home entertainment options, such as cable and DVDs, and towards the on-demand model. As more and more networks and entertainment providers launch their own on-demand products, the migration of revenue over to the streaming channel figures to only keep growing.

Streaming Revenue Forecast

Streaming Revenue Forecast

It's pretty clear that the subscription revenue model is taking over the old advertising revenue model. Ad blockers and lower ad revenue rates are only going to force content providers to develop their own subscription models. The high margins in adding new customers to an existing platform are attractive and don't necessarily rely on the cyclicality of the advertising business.

Streaming Revenue Forecast

Streaming Revenue Forecast

Roundhill Streaming Services & Technology ETF (SUBZ)

The economic backdrop in which these businesses continue to grow rapidly is firmly in place. I'm honestly a little surprised that an ETF hasn't been developed sooner that focused solely on the streaming space. Netflix (NFLX) has obviously been the heavy hitter in this space for years, but the development of competing platforms and streaming providers has made this a much more diverse space to invest in today.

SUBZ Country and Market Cap Exposure

SUBZ Country and Market Cap Exposure

SUBZ has just over half of its assets committed to U.S. companies, but the international markets is where the real growth lies. Using Netflix as an example, subscriber growth in the United States is in the process of maxing out as new subscription rates have slowed considerably. The company has dedicated most of its business growth budget overseas given the comparatively lower internet availability and streaming penetration rates.

Not surprisingly, the lion's share of the portfolio belongs to the mega-cap names, such as Netflix and Disney (DIS), but the 35% allocation to small- and mid-caps provides further growth potential within an already growing industry.

Given that SUBZ is actively managed, we haven't been able to get a peek into what the fund actually looks like until its launch today.

SUBZ Top 10 Holdings

SUBZ Top 10 Holdings

The top of the portfolio is filled with the expected names - Netflix, Disney, Roku (ROKU) and Spotify (SPOT). You can also see the heavy international influence with the presence of J-Stream, Kuaishou, AfreecaTV, Tencent Music and Bilibili.

With an expense ratio of 0.75%, the fund isn't egregiously priced, but it also isn't doing the fund any favors.

Conclusion

I'm all in favor of ETFs that provide investors with unique exposure to growing and developing industries. The streaming sector is certainly one that has demonstrated success and will continue to grow over the next several years, so Roundhill's new fund is both timely and logical.

Roundhill already has a combined $500 million in assets between NERD and BETZ, so it's demonstrated the ability to create a successful themed product. I think SUBZ is an easy sell based on the growth of the subscription model as well as the continued migration towards streaming and on-demand services.

I think the build-up could be a bit slow, but this has the look of another winner for Roundhill.

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