Cable Industry

Cable Industry

Postby winston » Fri Sep 25, 2015 7:14 am

Disruptive Technology That Could Wipe Out the Cable Industry

Trend(s): Cord-cutting, streaming, mobile

Explanation: This is a popular disruptive trend to highlight: The migration of cable TV subscribers away from the traditional “bundle packages” in favor of streaming video services like Netflix (NFLX) and Hulu has sparked chatter of the looming “death of cable” for years now.

But here we are in 2015 and cable’s still around … hell, it’s not even on its deathbed yet! What’s going on?

Big things take time. And the death of a market worth hundreds of billions of dollars doesn’t just happen overnight.

There is movement on the part of cable companies though, and it’s reactive, reflecting changes in consumption and demand. Instead of the “too bad, we have a monopoly and these are your choices,” sort of attitude, cable companies are adopting a more a-la-carte set of offerings.

Specifically, Verizon (VZ) Fios now offers “channel packs” of smaller channel bundles, which have themes. You get a base package and two packs of your choice for $55 a month, but you can add on additional packs for $10 per month on top of that.

Increasingly, networks themselves are opting to subvert or diversify away from the traditional bundled-TV distribution strategy, embracing “over-the-top” programming wherein content is simply made available online for a monthly fee. CBS (CBS) and Time Warner‘s (TWX) HBO are two prominent content companies embracing streaming early in this process.

In early August, Disney (DIS) shocked investors by posting a severe miss on revenues in its cable division, which CEO Bob Iger attributed to experiencing “some subscriber loss” in the period.

DIS stock got slammed, plunging from $122 a share to $95 at its trough. At $102, it has still got a ways to go before it gets back to its pre-earnings levels … and if people continue to reject traditional bundles, it won’t just be cable companies, but the networks themselves, that suffer.

The thing about disruptive technology is that it’s impossible to predict in the long run — which makes it all the more dangerous. Lest we forget, cable was literally just two Supreme Court votes away from being completely disrupted last year by a company called Aereo, a service that plucked broadcast waves out of the air and transmitted them to Aereo subscribers.

To me, any industry that can potentially be decimated by a simple technology and a clever business model eventually will be.

Major at-risk stocks: Time Warner Cable (TWC), Charter Communications (CHTR), Comcast (CMCSA)

Source: Investor Place
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