The possible winner
While I see most cable networks seeing a bit of a drop in revenue due to the new mode, there is one potential winner. Cable media company AMC Networks Inc (NASDAQ:AMCX)
owns the most popular television show at the moment in “The Walking Dead.” Considering that AMC Networks Inc (NASDAQ:AMCX) only gets $0.29 per subscriber for its channel, the company would likely charge much more for its current highly demanded channel in the future.
The downfall to AMC Networks Inc (NASDAQ:AMCX) in an a la carte subscription model is its other channels. The company owns AMC Networks Inc (NASDAQ:AMCX), IFC, Sundance Channel, and WEtv. AMC Networks Inc (NASDAQ:AMCX) is the fourteenth most watched cable channel. IFC, WEtv, and Sundance Channel all fail to crack the top 35 most watched cable networks. AMC bundles its channels together and therefore gains the additional revenue from the seldom watched networks.
AMC Networks Inc (NASDAQ:AMCX) has already caught on to cable companies possibly not paying up for its other channels. The company earlier
threatened to move
“The Walking Dead” to a different channel to increase advertising and subscription revenue outside of its namesake brand. AMC investors shouldn’t be worried about this bill, as its top network is underpaid compared to peers like FX ($0.51) and USA ($0.64).
Can the system work?
As a cable subscriber, I don’t enjoy paying for all the channels that I don’t want. However, I do appreciate the luxury of being able to find something to watch or be introduced to a new sport or show by having other channels. I don’t think this bill will pass through Congress and think investors should be less worried about it than Wall Street fears.
The biggest problem I see with the new channel service would be people adding channels for short periods of time and then dropping them. This would cause fees to rise as subscription rates would go through drastic changes. Recent examples of channels that saw huge one time spikes were: Oprah Winfrey Network (Lance Armstrong interview) and Discovery Communications Inc. (NASDAQ:DISCA) Channel (Nik Wallenda’s walk). What would hotel rooms or apartment complexes that provide cable for customers do with the new service? Would men never be able to watch a sporting event in a hotel room or at a girlfriend’s house if ESPN wasn’t included in their plans?
Don’t panic the a la carte subscription mode just yet. These companies listed above are great investments going forward. Each would be hurt by a new subscription model, but I think the risk is too low to be worried at the moment.
Chris Katje has no position in any stocks mentioned. The Motley Fool recommends AMC Networks and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Walt Disney. Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article The New Television Bill Could Impact These Stocks originally appeared on Fool.com is written by Chris Katje.
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