Playing The Streaming Video Space
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While the bulk of the focus on streaming video has been on content and direct competition, a critical factor has been largely overlooked. Each of these services is likely to offer access to different content, meaning that in order to receive more, a customer will need to have more than one service. The bulk of attention has been on which option will beat the others, but perhaps these are complimentary options, not a case of either-or. If this proves to be the case, Netflix (NASDAQ: NFLX), Amazon.com (NASDAQ: AMZN), Coinstar’s (NASDAQ: CSTR) Redbox and Verizon Communications (NYSE: VZ) will benefit; Comcast (NASDAQ: CMCSA) is the company to be concerned about in the space.
The Price Differential
While there is real price competition in streaming video, the relative prices of these services is very low when compared to the cost of even basic cable. Netflix, which drew the extreme ire of its customers when it essentially doubled prices a year ago, costs subscribers only $8 per month. Amazon’s Prime service cost just $79 per year and gives members access to a large portion of the company’s content. Additionally, the data packages available to owners of a new Kindle Fire HD cost only $49. The price of the streaming service to be offered by the partnership between Verizon and Redbox has yet to be released, but is expected to be similarly priced.
By contrast, the most basic cable packages cost at least $30 per month and do not give subscribers access to stored movie content. Comcast recently rolled out its Streampix service as a way to compete with some of these add-on services. It is available free to customers at a high enough service level (digital basic at $59 per month, depending on other factors) or as an additional fee for those with lower levels of service. Thus far, Streampix is seen as method by which Comcast is trying to retain customers, but it is expected to be expanded in the future.
The takeaway is that for less than the cost of basic cable, you can get access to all three services. Under this scenario, given the rapidly increasing access to television content through streaming video, many customers would have access to more content than with cable. This is likely to put real pressure on Comcast in terms of content.
Sports, The Great Equalizer
Given the increasing access to even serial television content thru streaming video, the real equalizer is sports content. Sporting events are unique in that watching them in real time is of actual importance. Where you can easily watch a show hours or days after it is originally aired, sports need to be watched as they occur. With this is mind, it is not surprising that critical content like Monday Night Football has moved from network television – available with an antennae – to a cable network (ESPN). Maintaining control over sports will be a critical factor for Comcast going forward.
The Proper Perspective
While most of the current discussion is focused on which streaming video service will obtain dominance to the detriment of the others, I believe that it may be possible for these services to happily coexist. The balance between various options is likely to persist as long as each service has appealing content that cannot be accessed in any other way. Consumers may wish to use multiple options, and as long as these remain cheap on a relative basis when compared to cable, they may co-exist. Sports, and the lack of full development in technology, is leaving Comcast in the hunt, but as content and technology shift, dominance and even the basis for comparison may change. In the interim, Netflix continued missteps make it a speculative play, while other options look attractive on continuing developments.
Interested in Additional Analysis?
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Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Netflix. Motley Fool newsletter services recommend Amazon.com 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.