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The Cybersecurity Boom

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The Cybersecurity Boom

How Investors Can Play the Global Explosion in Cyberattacks and Cybercrime

Thanks to Purefunds Cybersecurity ETF (HACK) for helping us put this together.

In 1983’s WarGames, a young Matthew Broderick unwittingly hacks into military central computer while searching for video games and almost inadvertently starts World War III. This film is classified on IMDB as in the “Sci-fi, Thriller” genres.

While the prospects of cybercrime and cyberterrorism are certainly thrilling (and scary), the descriptor of “Sci-fi” for the movie may no longer be necessary. In the last calendar year, there’s been dozens of high-profile cybersecurity incidents that are not a far cry from the geopolitical near-miss in WarGames.

The United States government and the country’s largest bank have both had serious security intrusions as of recent. This summer the United States Government revealed it had over 20 million records stolen by hackers allegedly based in China. Just as concerning, it was exactly one year ago that J.P. Morgan was compromised with records stolen from over 76 million households and 7 million small businesses. The company has now vowed to spend $250 million a year in preventing such incidents.

Most recent of all is this week’s hack of the popular adultery site Ashley Madison. The leak of sensitive information on potentially 37 million customers isn’t a potential geopolitical concern as the above cases, but it does have business implications: the website’s plan to raise $200 million in an IPO in London has now been kiboshed for the foreseeable future.

If big organizations like Sony, Target, Google, and Home Depot can’t do anything to stop cybersecurity incidents, what chance do the rest of us have?

And that’s the problem with cyberattacks. Detected incidents have skyrocketed over the last five years, soaring from 3.4 million to 42.8 million from 2009-2014, and they now cost the global economy an estimated $400 billion a year. Every day these incidents happen on a small scale, but today’s hacking technology and sophistication allows for much more. Exploitation of big cybersecurity vulnerabilities could cause financial chaos, destroy reputations of entire companies, expose business and state secrets, and even shut down moving vehicles remotely. This is not science fiction. This is reality – and we haven’t even gotten into the hypothetical potential damage that hackers could cause if they had even more resources or resolve. People’s lives and money are at stake.

Systems are more sensitive and hyperconnected than ever before, and hackers are deploying more sophisticated tactics to take advantage of them for personal or organizational gain. Luckily, there is also an entire industry of engineers, programmers, analysts, designers, cryptographers, and other professionals trying to build the walls and moat around the castle. Cybersecurity, as we depict in this infographic, is a booming industry with hundreds of companies scrambling to protect us from having intellectual property, health records, financial information, and other vital data compromised.

That’s why by 2020, the cybersecurity market is expected to be valued at $170.2 billion, which implies a 9.8% CAGR (compound annual growth rate) from today’s estimate of $106.3 billion. Businesses and governments are spending more on cybersecurity: even the Whitehouse announced this year that in its 2016 fiscal budget that it would aim to spend $14 billion on additional measures. Fifteen years ago, cybersecurity was only a blip on the US government’s radar at $938 million in spending.

The private sector is in the same boat, as 69% of business executives see cyberattacks as a threat to their growth. This is a fair statement since Verizon estimates in its 2015 Data Breach Investigations Report that the average cost of a cyberattack to a business ranges between $475,000 to $9 million depending on the number of records stolen.

Among the companies that are benefiting from the surge in cybersecurity spending include those building firewalls, secure servers, routers, anti-virus software, and malware detection tools. Firms that specialize in consulting and solving related security problems are also getting plenty of interest. Investors can potentially profit from this sector as well by identifying companies and funds that will gain from booming activity and spending in the sector.

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Which Streaming Service Has the Most Subscriptions?

From Netflix and Disney+ to Spotify and Apple Music, we rank the streaming services with the most monthly paid subscriptions.

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Which Streaming Service Has The Most Subscriptions?

Many companies have launched a streaming service over the past few years, trying to capitalize on the digital media shift and launching the so-called “streaming wars.”

After Netflix grew from a small DVD-rental company to a household name, every media company from Disney to Apple saw recurring revenues ripe for the taking. Likewise, the audio industry has long-since accepted Spotify’s rise to prominence, as streaming has become the de facto method of consumption for many.

But it was actually the unexpected COVID-19 pandemic that solidified the foothold of digital streaming, with subscription services seeing massive growth over the last year. Although it was expected that many new services would flounder along the way, media subscription services saw wide scale growth and adoption almost across the board.

We’ve taken the video, audio, and news subscription services with 5+ million subscribers to see who came out on top—and who has grown the most quickly—over the past year. Data comes from the FIPP media association as well as individual company reports.

Streaming Service Giants: Netflix and Amazon

The top of the streaming giant pantheon highlights two staples of business: the first-mover advantage and the power of conglomeration.

With 200+ million global subscribers, Netflix has capitalized on its position as the first and primary name in digital video streaming. Though its consumer base in the Americas has begun to plateau, the company’s growth in reach (190+ countries) and content (70+ original movies slated for 2021) has put it more than 50 million subscribers ahead of its closest competition.

The story is the same in the audio market, where Spotify’s 144 million subscriber base is more than double that of Apple Music, the next closest competitor with 68 million subscribers.

Meanwhile, Amazon’s position as the second most popular video streaming service with 150 million subscribers might be surprising. However, Prime Video subscriptions are included with membership to Amazon Prime, which saw massive growth in usage during the pandemic.

ServiceTypeSubscribers (Q4 2020)
NetflixVideo203.7M
Amazon Prime VideoVideo150.0M
SpotifyAudio144.0M
Tencent VideoVideo120.0M
iQIYIVideo119.0M
Disney+Video94.9M
YoukuVideo90.0M
Apple MusicAudio68.0M
Amazon Prime MusicAudio55.0M
Tencent Music (Group)Audio51.7M
ViuVideo41.4M
Alt BalajiVideo40M
HuluVideo38.8M
Eros NowVideo36.2M
Sirius XmAudio34.4M
YouTube PremiumVideo/Audio30M
Disney+ HotstarVideo18.5M
Paramount+Video17.9M
HBO MaxVideo17.2M
Starz/StarzPlay/PantayaVideo13.7M
ESPN+Video11.5M
Apple TV+Video10M
DAZNVideo8M
DeezerAudio7M
PandoraAudio6.3M
New York TimesNews6.1M

Another standout is the number of large streaming services based in Asia. China-based Tencent Video (also known as WeTV) and Baidu’s iQIYI streaming services both crossed 100 million paid subscribers, with Alibaba’s Youku not far behind with 90 million.

Disney Leads in Streaming Growth

But perhaps most notable of all is Disney’s rapid ascension to the upper echelons of streaming service giants.

Despite Disney+ launching in late 2019 with a somewhat lackluster content library (only one original series with one episode at launch), it has quickly rocketed both in terms of content and its subscriber base. With almost 95 million subscribers, it has amassed more subscribers in just over one year than Disney expected it could reach by 2024.

ServiceTypePercentage Growth (2019)
Disney+VideoNew
Apple TV+VideoNew
Disney+ HotstarVideo516.7%
ESPN+Video475.0%
Starz/StarzPlay/PantayaVideo211.4%
Paramount+Video123.8%
HBO MaxVideo115.0%
Amazon Prime VideoVideo100.0%
Alt BalajiVideo100.0%
YouTube PremiumVideo/Audio100.0%
DAZNVideo100.0%
Eros NowVideo92.6%
Amazon Prime MusicAudio71.9%
Tencent Music (Group)Audio66.8%
New York TimesNews60.5%
SpotifyAudio44.0%
HuluVideo38.6%
ViuVideo38.0%
NetflixVideo34.4%
Tencent VideoVideo27.7%
iQiyiVideo19.0%
Sirius XmAudio17.4%
Apple MusicAudio13.3%
YoukuVideo9.6%
PandoraAudio1.6%
DeezerAudio0%

The Disney+ wave also spurred growth in partner streaming services like Hotstar and ESPN+, while other services with smaller subscriber bases saw large growth rates thanks to the COVID-19 pandemic.

The lingering question is how the landscape will look when the pandemic starts to wind down, and when all the new players are accounted for. NBCUniversal’s Peacock, for example, has reached over 30 million subscribers as of January 2021, but the company hasn’t yet disclosed how many are paid subscribers.

Likewise, competitors are investing in content libraries to try and make up ground on Netflix and Disney. HBO Max is slated to start launching internationally in June 2021, and ViacomCBS rebranded and expanded CBS All Access into Paramount+.

And international growth is vital. Three of the top six video streaming services by subscribers are based in China, while Indian services Hotstar, ALTBalaji, and Eros Now all saw surges in subscriber bases, with more room left to grow.

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How Do Esports Companies Compare with Sports Teams?

With some esports companies more valuable than traditional sports teams, we visualize esports vs sports in franchise value.

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How Do Esports Companies Compare with Sports Teams?

Are esports on the same level as “real” sports? These comparisons range from tricky to subjective, but the monetary value of companies speak for themselves.

The world’s largest esports companies have definitely risen to the occasion. Valued at almost half-a-billion dollars, they’ve started to pass some sports franchises in value.

In the above graphic, we compare Forbes’ valuation of the top 10 esports companies in 2020 against median franchises in the “Big Four” major leagues (NFL, MLB, NBA, and NHL). Despite competitive gaming’s rapid growth, there’s still a long way left to go.

Esports Impress but NFL Teams Reign Supreme

The world’s top esports companies have grown quickly, and impressively.

As of 2018, there was only one esports company worth more than $300 million in valuation. By 2020, four of the top 10 were valued at more than $300 million.

Esports CompanyGames with FranchisesValue (2020)
TSMLeague of Legends$410M
Cloud9League of Legends, Overwatch$350M
Team LiquidLeague of Legends$310M
FaZe ClanCall of Duty$305M
100 ThievesLeague of Legends, Call of Duty$190M
Gen.GLeague of Legends, Overwatch, NBA 2K$185M
Enthusiast GamingCall of Duty, Overwatch$180M
G2 EsportsLeague of Legends$175M
NRG EsportsCall of Duty, Overwatch$155M
T1League of Legends$150M

When compared to traditional sports valuations, esports companies have already reached major league hockey status.

TSM, the world’s most valuable esports company in 2020, has a higher valuation than five NHL franchises. In fact, four esports companies were estimated to be more valuable than two NHL franchises, the Florida Panthers and Arizona Coyotes.

But other sports leagues are further away. While the median value of an NHL franchise in 2020 was $520 million, the MLB, NBA, and NFL all saw median values of over $1.6 billion.

Esports vs. Sports FranchisesLowest Valued TeamHighest Valued TeamMedian
NFL$2.0B$5.7B$3.0B
NBA$1.3B$4.6B$1.8B
MLB$980M$5.0B$1.6B
NHL$285M$1.6B$520M
Esports (Top 10)$150M$410M$188M

Differences in Esports vs Sports Structures and Growth

Try as we might to make a clean apples-to-apples comparison between esports and traditional sports teams, there are significant differences in the business models to consider.

For starters, major esports companies own multiple franchises and non-franchise teams across many games. Cloud9 owns both the eponymous Cloud9 League of Legends franchise and the London Spitfire Overwatch franchise, for example, as well as non-franchise teams in Halo, Counter Strike: Global Offensive, Fortnite, and other games.

The revenue streams for esports companies are also extremely varied. Companies like TSM, 100 Thieves, FaZe Clan and Enthusiast Gaming made 50% or more of their revenue from outside of esports, having instead expanded into diverse companies with an equal focus on content creation and apps.

But it’s this greater ability to diversify, and the still-increasing size of esports fandom, that continues to grow esports valuations. In fact, TSM’s estimated 2020 revenue of $45 million is less than half of the Arizona Coyotes’ estimated revenue of $95 million, despite a $100+ million valuation difference in favor of TSM.

That’s why the continued maturation of esports is only going to make traditional sports comparisons easier, and closer. Instead of having to pit companies against franchises, direct league-to-league comparisons will be possible, and the differences will likely shrink from billions to millions.

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