Comcast’s Stay of Execution
A couple weeks ago, I promised to report back with news of the FCC’s big vote.
You’ll recall that the FCC wants to replace your “cable box” with an app on your smartphone. This would effectively kill the monopoly enjoyed by Comcast and Time Warner.
Unfortunately, I can’t pronounce the cable companies dead today.
The FCC delayed its vote.
The vote, originally scheduled to take place on Thursday [Sept. 28] as part of the commission’s monthly meeting, has been postponed indefinitely as the government agency works to iron out details amid intense pushback from cable providers, media companies and politicians. — CNN
The agency is optimistic that a vote will be cast “within the next couple weeks,” yet there is “no deadline” on the books.
But that won’t stop us!
We just deconstructed and evaluated the entire cable TV/broadcasting industry.
Below you’ll find the biggest winners (and losers) over the next 12 months.
So place your bets, stat!
Comcast’s Last Laugh
As streaming content takes over, who will reign victorious in the entire cable TV/broadcasting industry?
You might be surprised, but it’s the cable companies themselves.
Let me explain…
Netflix and Amazon wow their audiences by streaming high-end original TV series featuring big-time talent.
Sure, they’ve stolen millions of paid cable TV subscribers over the last decade.
But under the cover of darkness, cable companies have been working hard in the background with one goal in mind…
The end of net neutrality.
If you’re unfamiliar, net neutrality is the basic principle that internet service providers must treat all Internet data as the same — regardless of its source or destination.
And as you know, many cable companies also double as internet service providers.
Without the neutrality rule, cable companies will have the freedom to charge you more for websites that require more ISP bandwidth like Amazon and Netflix.
Even better, they’ll be able to throw up their own streaming sites — and sell them to you at a discount to your favorite cord-cutting website.
And that’s not all!
Take a look at the image to the right.
It shows what internet subscriptions could look like in a world without net neutrality, according to Reddit user “quink.”
You could end up paying a lot more just to visit the sites you love and frequent often.
Comcast, Verizon and their cable kin are playing the long game.
And they’ve got the right man in the right place…
Ajit Pai, a former lawyer for Verizon, whom has served as FCC commissioner since 2012, just bagged a second five-year term.
So he’ll be holding the regulatory reins for his old cable pals for a while.
Bottom line: Cable TV will likely die a slow death at the hands of streaming content. But thanks to their booming internet business and friendly legislators, cable companies win the broadcast wars no matter what.
King of the Hill (Again)
Traditional cable companies are finding that consumers are “cutting the cord” faster than ever before.
Usage of their pricey services is down 2.5% in the first half of 2017.
Now, some of that business will migrate to “skinny cable” services that offer a more limited range of channels at a lower cost.
Others are turning to streaming services such as Netflix. And as Jonathan mentioned above, Netflix is developing desirable original content to keep customers engaged.
But of all the streaming services, the most likely long-term winner is Amazon.
Amazon already has 70 million Prime subscribers worldwide, who pay an annual subscription in return for free package delivery. That means the company also has intensive information on those subscribers’ buying and entertainment habits.
That is absolutely crucial…
With Amazon Prime Video, customers receive streaming services with a modest additional monthly fee. But Amazon can also tailor its offerings to subscribers’ interests and provide them with content that reflects their viewing habits.
Add to this Amazon’s deep pockets — and its ability to commission top-quality content such as The Grand Tour and The Man in the High Castle — and you have an exceptional ability to reach viewers with higher incomes, who often display more modest TV usage.
Needless to say, if Amazon can get a substantial share of the higher-income viewers, and use its knowledge of those viewers to tailor advertising offers, its audience will prove exceptionally attractive to advertisers.
Takeover Potential Greater Than Ever…
Jonathan has unearthed the key point here…
That is, cable companies aren’t about to go to their deathbeds without a hard-fought battle. And the major battle line has been drawn with net neutrality.
But if they lose that fight, which I suspect they will, it’s not an instant death sentence.
Increasingly, cable companies and pay-TV operators are partnering with Netflix. Charter is the most recent one to do so, bringing the total to more than 12 pay-TV partnerships in the U.S. alone.
Doing so is a way to ward off death by embracing streaming video. It makes sense right now, as many consumers have shown a willingness to double up (i.e., pay for streaming services and cable).
At the end of the day, as investors, our focus should be singular: Go where the growth is! That’s clearly streaming services.
In the first quarter of this year, Netflix subscribers officially eclipsed the number of cable TV subscribers in the U.S. So growth is booming, while cable companies are slowly bleeding out.
If we expand our perspective to include the world, 40% of global online video viewers still don’t subscribe to any streaming services. That’s a massive untapped growth opportunity.
So what streaming services represent the best investments?
I’m keen on Martin’s rationale and vote of confidence for Amazon. After all, nobody’s ever bet against Jeff Bezos and won.
However, it’s important to realize that Amazon isn’t a pure-play investment or even a clear market leader. Yet.
The latest data indicate that Netflix is eating everyone’s lunch, accounting for nearly 50% of all the time spent streaming in the U.S.
We’ll get a fresh update on Netflix’s chart-topping growth and market share when the company reports results on October 16.
Last quarter, Netflix torched expectations, which sent shares soaring to new all-time highs. Another repeat performance could be in store. So don’t miss out!
And don’t be surprised if Netflix is ultimately acquired. Apple and Amazon make the most strategic sense and could finance such a historic deal.
As we’ve talked about here repeatedly over the last week, any such news would certainly “break” the chart, handing savvy investors a chance to pocket $100,048 or more.
There are over 300 such opportunities each year in the market. To make sure you don’t miss the next one, check out our brand new research here.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily