Yahoo Finance Can Pay-TV Survive OTT TV Streaming Challenge in 2018?
Internet TV streaming service is gradually gaining market traction globally. Of late, the legacy pay-TV industry has been facing stiff competition from online video streaming service providers. Exponential growth of mobile data usage supported by flourishing high-end smartphone and tablet devices, has altered the entire dynamics of the traditional pay-TV industry.
At present, the web-based digital media market is growing by leaps and bounds. Digital media brands are becoming immensely popular with the younger generation. With growing demand for smartphones and tablets, target customers are increasingly switching to watching videos online, and preferring low-cost over-the-top (OTT) video streaming service over costlier legacy pay-TV connections.
Competition Intensifies in the OTT TV Market
Netflix Inc. NFLX and Amazon.com Inc. AMZN are the two leading Internet TV streaming service providers. Netflix added a record high 7.41 million subscribers in the first quarter of 2018. Apart from these two companies, YouTube TV and Hulu Live TV also offer Internet TV streaming facilities.
Major pay-TV operators, such as AT&T Inc. T, DISH Network Corp. DISH along with broadcast TV and film producer Sony Corp. SNE have already launched their Internet TV streaming services. AT&T reported the addition of 312,000 customers to its OTT service in first-quarter 2018.
In August 2017, The Walt Disney Co. DIS announced its plans of launching ESPN streaming service in 2018 and a branded direct-to-consumer streaming service in 2019. Telecom behemoth Verizon Communications Inc. VZ recently stated its plan to offer Internet TV streaming along with its upcoming 5G launch in 2019.
In September 2017, Comcast Corp. CMCSA launched its TV streaming service - Xfinity Instant TV – only to its high-speed Internet subscribers. The latest to join this bandwagon is T-Mobile US Inc. TMUS. The company is set to unveil its online TV steaming service in 2018 after its deal to acquire Denver–based video technology innovator Layer3 TV Inc.
Amazon and Sony sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. All other above mentioned stocks carry a Zacks Rank #3 (Hold).
Is Cannibalization a Concern?
A major concern of pay-TV operators, which recently entered into Internet TV streaming, is that the latter has actually cannibalized the legacy pay-TV service. Most of these companies are offering both legacy pay-TV services as well as Internet TV streaming service, with selected TV channels at lower costs.
The operators are yet to find out an appropriate trade-off between these two types of services. Making attractive online ventures are drawing subscribers to the new service at the cost of traditional pay-TV business model. Ultimately, the Internet TV service is yet to stop cord cutting, the biggest threat for pay-TV operators.
Statistics reveal that Netflix has more than 125 million subscribers and Amazon has an estimated 60 million Prime TV customers, while AT&T, currently the largest pay-TV operator in the United States, serves only 25 million subscribers across its legacy pay-TV and Internet TV streaming platforms.
Digital Advertising: The Next Battlefield
In order to derive maximum synergy from the combined video content and video distribution platform, ISPs (Internet Service Provider) are aggressively penetrating the advertising technology market. Inclusions of dynamic ad-insertion, targeted audience advertising and data-driven TV advertisements are steps toward the same objective.
This advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting. Offering Internet TV is a significant to step to claim a piece of the digital revenues pie.
Bottom Line
An increasing number of customers are using the Internet to watch videos and want mobility of content. However, the Internet TV streaming service, launched by leading pay-TV operators in the United States, is yet to cope with the onslaught of the low-cost online video streaming services. It remains to be seen how major pay-TV operators can survive the competition.
Chart below shows price performance of OTT operators year to date.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
AT&T Inc. (T) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Sony Corporation (SNE) : Free Stock Analysis Report
DISH Network Corporation (DISH) : Free Stock Analysis Report
Comcast Corporation (CMCSA) : Free Stock Analysis Report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
