Investing to Profit from the Death of TV
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Industries like publishing and music have been completely disrupted by internet and related technologies, so it’s only natural to believe that TV will suffer the same fate. In fact, the process is already underway, and investors should place close attention to the emerging opportunities coming from the transformation of the TV industry.
The chart from ISI, published by Business Insider, is quite explicit: the web is killing TV, or at least changing it radically. People don´t subscribe to cable TV like they used to, and the internet has a lot to do with that. A big proportion of the time we used to employ watching TV is now used online, even when we choose to watch TV content we end up using other platforms like YouTube.
The video sharing platform owned by Google (NASDAQ: GOOG) has become tremendously popular on a world wide scale, and it has access to huge amounts of user generated content: people are uploading 48 hours of content per minute to YouTube. Most of these videos will have little or no repercussions, but YouTube has become the engine behind many global successes in the last years; Justin Bieber himself started his career as a YouTube phenomenon.
Google has access to all this content at almost no cost for the company, and YouTube is making inroads into original content too. The company is the world leader in online advertising, and that gives Google valuable know how when it comes to implementing the best monetization strategies for this kind of service. The online search giant is in a privileged position to benefit from the disruption of TV, and it also has the resources to capitalize the new opportunities.
Apple (NASDAQ: AAPL) is another big player standing to benefit from new habits and technologies regarding TV. The iPad is a revolutionary product in that area, and no competitor has developed a tablet which can be considered close enough to the iPad in terms of its cost and quality, at least as perceived by customers.
In the same way Apple used the iPod to revolutionize the music industry with iTunes, the company could easily leverage its position in the tablets markets to make attractive deals with the content producers over time. Besides, building a revolutionary TV product was one of Steve Jobs’ biggest obsessions, according to the excellent biography by Walter Isaacson, Jobs was quite excited about what he had in mind for TV.
I’d like to create an integrated television set that is completely easy to use. It would be seamlessly synched with all of your devices and with iCloud. It will have the simplest user interface you could imagine. I finally cracked it.
Another big technology bellwether which is targeting TV is Microsoft (NASDAQ: MSFT) the company has achieved an interesting success with Xbox and Kinect in the gaming industry; and will try to leverage that success with TV. Motion controlled gaming is a concept that can be turned into motion controlled entertainment quite easily; and that would certainly be an interesting product.
As for streaming, the most direct bet is clearly Netflix (NASDAQ: NFLX). The company has experienced its ups and downs, actually more downs than ups lately, but it’s still the pioneer in the streaming business. Netflix is investing heavily in its own content and international expansion, and the first mover advantage is important in the race for streaming.
Subscriber growth has been volatile at Netflix, and the company doesn't have the same kind of financial resources as many of its bigger competitors, so it’s quite a risky proposition. Investors in Netflix should be prepared for some considerable uncertainty as the company fights to sustain its position as the leader in streaming.
Netflix will face increasing competition over the following years, and that's an important risk to watch. On the other hand, it would be hard to find a company with such a big exposure to a changing TV industry. Netflix is ahead of the competition in streaming. If it manages to hold its position, the returns for investors could be astronomical now that the stock is so depressed due to its uninspiring numbers in the last quarters.
Change is the only constant, especially in the business world and in the stock market particularly. As TV is being disrupted by new technologies, investors should pay close attention to the new trends and business opportunities emerging from them. Things are looking interesting, stay tuned.
acardenal has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Microsoft, and Netflix. Motley Fool newsletter services recommend Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.