As more and more streaming services come online, and younger content consumers simply do not care where or how they view content, the traditional cable/satellite model is struggling. As time goes on and this trend locks in, the most likely beneficiary may be Amazon.com Inc. (NASDAQ:AMZN). It’s just one more reason to own AMZN stock.
Consider the following: Subscriber growth at Dish Network Corporation (NASDAQ:DISH) was pretty much flat — just about 14 million — for several years running. Then, in fourth quarter 2016, that number slipped to 12.5 million, followed by further declines, to 12.2 million, 11.9 million and 11.7 million in the following three quarters. That’s a 17% decline in just 12 months.
Comcast Corporation (NASDAQ:CMCSA), the nation’s largest cable provider, which has generally seen modest quarterly gains, lost 34,000 subscribers in Q2 and 125,000 in Q3. Charter Communications Inc (NASDAQ:CHTR), which has been in trouble for a while, has seen six consecutive quarters of declines, totaling about 525,000 subscribers.
Consumers are cutting their cables in increasing numbers.
Meanwhile, Netflix, Inc. (NASDAQ:NFLX) has seen some growth, although its domestic numbers are starting to flatten. Hulu is ramping up, now with 32 million subscribers. As that service is a joint venture between three studios, there’s plenty of content available.
What Subscribers Want
Eventually, the dust will settle and subscribers will likely have between two and four monthly streaming subscriptions. For the time being, Netflix will certainly be one. Hulu is a second. When The Walt Disney Co (NYSE:DIS) gets its service up and running — especially if it buys Twenty-First Century Fox Inc (NASDAQ:FOXA), that could be a third. HBO, Showtime, and others will fight it out for the fourth subscription.
Yet an aggregator like Amazon seems to fit the bill for competition. I don’t mean to license older programming, I mean as a place where current shows from all four major networks (and possibly others) could be streamed in a cable-like bundle. Amazon poked around with this model before it couldn’t agree with the networks on a deal.
Amazon was negotiating for the networks to offer services a la carte. However, as happens in the cable business, the networks didn’t want to just offer their flagship channels without forcing Amazon to take off-shoots and smaller channels. Amazon didn’t like that idea, and apparently believed margins were too thin to pursue the issue any further.
For now.
AMZN Will Come Out Ahead
Years ago, back when NBC’s “Heroes” was premiering, I remember having a chat with its show runner, Tim Kring. He told me: “Soon there will be a day where you can order any show, any episode, a la carte”. I think he will be proven right. He kind of already has been. But I believe that the networks will, at some point, cave. They will bundle with Amazon, because nobody will choose four individual streaming channels for the four major networks on top of all the other streaming services they have.
Amazon will come out ahead with streaming, like it does with everything else. That will only be a good thing for AMZN stock holders.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
