Credit: Shutterstock photoWhen Gil Scott-Heron uttered those famous words over that legendary drum pattern and base line, he was speaking upon the tumultuous social environment in the United States, not about the most recent stock price drops of companies in the television industry.
The primary media giants suffered these loses were Disney ( DIS ), 21 st Century Fox ( FOX ), Viacom ( VIAB ), CBS ( CBS ), and Time Warner ( TWC ). Currently, none of these companies have Zacks Rank grades of 1 or 2, meaning these stocks are not "Buys" or "Strong Buys." Disney, Viacom, and Time Warner currently have Zacks Rank #3 (Hold) grades, CBS has a Zacks Rank #4 (Sell) grade, and Fox has a Zacks Rank #5 (Strong Sell) grade.
The one cable company that has avoided the decline in revenues is Comcast ( CMCSA ) increased revenue by 11.3% and increased EPS by 10.5% per their latest earnings report .
The Woes of the Media Companies
Disney did not generate the revenues the company was expected to make this previous quarter, and its most notable subsidiary, ESPN, is losing subscribers . Since July 31 st , 21 st Century Fox share prices has decreased by 13% . Viacom revenues are down 11% year over year, and have been suffering a ratings decline that does not include a post Jon Stewart "Daily Show." The adjusted operating income for CBS has decreased 12% and missed its Zacks Consensus Estimate in revenues . Time Warner missed on both EPS and Revenues in the most recent quarter.
In light of these revelations, there are multiple questions that need to be addressed. Are these loses for these media companies an irregularity or the tipping point in initiating a new norm? Do these results signify the beginning of the end for cable television? "Is not having cable a cheaper and viable alternative?" As Emily Steel and Brooks Barnes write in the New York Timesarticle a few day ago, "If ESPN is having trouble, is the rest of television burnt toast?"
Members of the Insurgence
Cable providers need to make radical changes in their methods of delivering media content to the masses in order to compete in the evolving media market. Netflix ( NFLX ), Hulu, HBO, and Sling TV are revolutionizing the way people can consume television programming and are threats to make cable television an artifact of the 20 th century.
[Must note that Hulu is jointly owned by NBCUniversal (Comcast), Fox Broadcasting (21 st Century Fox), and Disney-ABC Television (Disney), HBO is a subsidiary of Time Warner, and Sling TV is a subsidiary of Dish Network ( DISH )]
Netflix reported in its last earnings report that the company added 3.3 million new subscribers , increasing total membership to over 40 million. Netflix is only gaining more popularity as the company expands its original content, obtains rights to more popular programming, and maintains its $8.99 per month price point. By addressing the question "Is not having cable a cheaper and viable alternative?", it will provide some answers to the other previously listed questions.
The Numbers
Let's examine the prices of cable and streaming services to determine the better value, using Comcast cable and internet prices for the comparison, since Comcast is the one company not affected by this negative financial trend. All prices for Comcast are from its website and are subject to vary depending on location.
Comcast offers 25 mbps internet for $24.99 per month for 1 year promotional price in a contract, television service, without internet, for $49.99 per month for 1 year promotional price in a contract, which does not include HBO, but includes ESPN, Food Network, and AMC, and another television service, without internet, for $99.99 per month for 1 year promotional price in a contract that does include HBO, Showtime, Starz, and the other premium cable channels.
Comcast also offers cable and internet bundle promotions for $89.99 per month for 2 years in a contract, which includes HBO and the other premium cable channels, and another offer for $99.99 per month for 2 years in a contract, which includes HBO, the other premium cable channels, NFL Network, and NBA TV.
After the promotional price is when prices increase dramatically, depending on the location of the services. The 25 mbps internet service becomes $66.95 per month max, the $49.99 cable service becomes $68.95 per month max, and the $99.99 cable service becomes $131.99 per month max. The $89.99 and $99.99 cable-internet bundles, after being locked into that 2 year contract, become $129.95 and $139.95 per month max.
If an individual were to go the streaming television service route, internet is needed; therefore, the $24.99 and $66.95 per month Comcast figures will be used. Netflix costs $8.99 per month, Hulu costs $7.99 per month, HBO Now costs $14.99 per month, and Sling TV costs $20 per month; no contracts are needed for these services.
If said individual were to subscribe to all of these streaming television services and use the listed Comcast internet, the price for the 1 st year would be $76.96 per month and then increase to 118.92 per month after the promotion is over. Without HBO, prices would be $61.97 for the 1 st year and $103.93 for the ensuing months. If said individual does not watch HBO or the channels provided on Sling TV, such as AMC, ESPN, and Food Network, or decides to use the loophole of accessing someone's cable account to then use the HBO GO, ESPN, and the many other free applications to watch programming, then prices are even cheaper.
It must be noted that the streaming television service option is based on a person owning a computer, smart TV, Roku, Chromecast, Xbox One, or some other device that supports the services.
Final Thoughts
The numbers do not lie. Streaming television service is a viable and cheaper alternative to cable. Unlike cable, individuals can pick and choose which services they want. Cables companies attempt to offer value, in that one may pay $132 per month for cable and receive a plethora of channel options.
However, individuals primarily watch only a handful shows on a handful of channels. There is simply no rationale to justify paying for over 100 channels when people maybe watch 10-12 channels at most. Cutting the cable cord is not a fad or temporary trend. It is the future, it is changing the status-quo, and this revolution will not be televised.
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DISNEY WALT (DIS): Free Stock Analysis Report
TWENTY-FIRST CF (FOX): Free Stock Analysis Report
VIACOM INC-B (VIAB): Free Stock Analysis Report
CBS CORP (CBS): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis Report
DISH NETWORK CP (DISH): Free Stock Analysis Report
NETFLIX INC (NFLX): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
