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Will a Rush of Streaming Services Wipe Out Cable Providers?

Zacks Equity Research

The advancement in wireless technology and the choice of Internet viewing by millennials is giving the streaming industry a push. A line of new streaming services is due for launch this year, giving both viewers and investors a new choice in this growing market.

However, will giving up cable connection be easy? Let’s analyze causes for the doom of cable TV and rise of streaming.

Is the Future of Cable Gloomy?

Access to cable at home has seen a gradual decline from around 93% Americans (as recorded by NCTA — the Internet and Television Association back in 2012) to 66% in 2019. On the other hand, streaming services has made huge progress in the last seven years, with 20% Americans already using them. This has inspired several broadcasters and big names in entertainment to start their own streaming services.

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Millennials and the Gen X lag the patience to wait and hold on to one thing. As per a recent survey by Deloitte, 88% millennials and 77% Gen X have subscription to at least one streaming service. Streaming has become a trend more than “just entertainment.”  Streaming services like Netflix, Inc. NFLX have become a necessity to stay trendy and feel socially included.

Let’s not blame streaming alone for cable television’s doom, it has drawbacks that just aggravated with the advancement of the wireless technology. Streaming allows one to watch a series without waiting, anywhere and anytime. Moreover, major streaming services like Netflix, Hulu and Amazon.com, Inc.’s AMZN Amazon Prime have their short and original series which attract viewers.

In fact, these streaming services provide new movies within a week or two, whereas the same movies take months and sometimes years to be telecast on cable. However, people still using cable connections do not want to give them up as they have Internet services bundled with the television. So, cutting cord is not an option for them as providers sometimes take advantage of the monopoly and force users to take a bundled service.

Further, privacy has become a major issue for the cable users. Those who avail the Internet with cable television have less privacy on the Internet, as cable internet works with a stable IP address, making tracking easier.

The Era of Streaming

Netflix had over 151 million paid streaming subscribers worldwide in the second quarter of 2019 with over 6.56 million free trial customers. Of this number, 60.1 million subscriptions are from the United States solely.

When Netflix was launched in 1998 as the world’s first online DVD rental store, little did it know that it would become the emperor of the streaming industry. With Hulu’s entry in 2008, other companies also started to feel the rush with the industry’s latent potential. But 2019 seems to be the beginning of the streaming era with big brands slated to launch their platforms by the end of this year.

Cable provider like Comcast Corporation CMCSA has taken bold steps to stay in the market. The company on Sep 18 launched Xfinity Flex device that is a cable box without the cable and free for Internet-only subscribers, costing viewers only $5 per month to rent the box. Though this box has several apps major streaming apps are missing.

Giants like The Walt Disney Company DIS and Apple Inc. AAPL are all set to launch Disney+ and Apple TV Plus by the end of November. The competition majorly lies on the content they provide and what viewers need to pay.

Major content providers like BBC, Disney and Warner Brothers keep removing content or stop renewing permission to play on Netflix as they all are launching their own streaming platforms. All the streaming service providers and entertainment firms are removing their content from Netflix and other free streaming platforms to make their content exclusive.

Apple TV Plus will cost $4.99 per month, while Disney+ has a pocket pinch of $6.99. Disney’s best offer will provide a bundle pack of Disney+, ESPN and Hulu for $12.99. Netflix however will struggle to add more subscribers for $8.99 a month without content from Disney’s Marvel-Pixar hits and less content from other production houses. Viewers are going to have a tough time in deciding what they want and how much like to spend.

Netflix holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
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Zacks Investment Research