Cable Companies Are Scared To Death Just a few years ago, almost every single one of us had a hefty cable bill to pay that included our phone lines, cable and internet connection. For many, that bill was nearly $200/month. Then, many such as myself started moving to mobile phones, and slowly cutting off our land line phones. The much bigger change though has started only recently. Cable had this amazing model where if you wanted to see a couple of shows per week, you needed to pay for the entire cable package and those 200 channels. Sure, some could be added at an extra fee but there was little choice available.
Fast Forward To 2012 These days, you can get most of the tv shows through online means such as the Apple store, Hulu, Amazon’s Prime streaming service or Netflix. There were 3 missing parts:
-Many shows were still missing
-The better produced shows from HBO and others remain off-limits
-Live events such as sports are not consistently available without cable
Now just look at the what happened in the past few months:
-Practically every show is now available with Disney even getting on-board through an exclusive deal with Netflix
-Netflix and Amazon have now started to produce high quality exclusive tv series
-Several professional leagues such as the NFL and MLB have started streaming and selling their own content
We’re not there yet.. but we’re close to the day where users could cut out cable and get as much content at a fraction of the cost. It has already started, especially among the younger viewers.
Could Even The Internet Service Be Under Attack We don’t know much about how successful Google Fiber is but the fact that the company is offering a much superior service at a fraction of the cost is one more reason for cable companies to start worrying. What if Google or others started offering such a service?
Are The Cable Companies Toast? When you think about it, one huge problem is that these companies have huge fixed costs so even a small user reduction would be very dangerous for them. I personally prefer getting out early than trying to get out late. Yes, they do offer very attractive dividend yields but that’s not enough for me.
Do you hold any cable stocks? What outlook do you see 5-10 years from now?