The Reigning Champion
No matter how much attention Netflix receives, cable tv still rules the American household. Whether this is out of tradition, convenience, financial concerns, or any other reasons, more people are sticking with cable than subscribing to streaming services. Some figures suggest that “pay-tv” lost almost half a million subscribers by the end of the second quarter of 2012, but many of these “losses” switched to services such as AT&T Inc. (NYSE:T) U-Verse and Verizon Communications Inc. (NYSE:VZ) FiOS. This is still cable tv when considering cost and content.
Americans spend an average time of over five hours each day watching television. Whether it is on in the background or being diligently viewed, it’s still on and consumers are still paying for it. Reasonable explanations for this include the access to live broadcasts and original content.
Unless the internet can one day provide everything, my house will retain cable so my mother can watch American Idol and my father and I can watch ESPN. Forget live broadcasting for a moment and realize that Netflix is on the offensive for entertaining you with never-before-seen content. Queue in Comcast flexing its muscles with its $16.7 billion deal.
Comcast now has full control of NBC, CNBC, Universal Pictures, and many other channels including Bravo. NBC networks have been performing well since the Summer Olympics in 2012, including its original content such as the final season of 30 Rock. Even after buying the company (at a bargain price according to Wunderlich Securities analyst Matthew Harrigan) and considering imminent purchases such as the GE Building at 30 Rockefeller Plaza for $1.4 billion, Comcast is still swimming in $8.2 billion worth of cash. Looks like the company is more than ready to crank out original content, fuel innovation, and compete on a higher level than an ordinary cable provider.
Comcast reported a 12% increase in total sales for 2012 despite losing 22 million cable subscribers. However, it is now gearing convince people to supplement cable with Netflix, not replace it. If more acquisitions and purchases end up costing in the short term, their internet business will assist the investment having added 1.2 million high-speed internet subscribers.
Beneficiaries of One Another (for now)
Netflix and Comcast are growing companies. There is a vast pool of potential consumers that would be willing to use both services if the products are deemed worth the money. Pooling more resources to their past success lays the groundwork for future profits and more importantly, stability. Both companies are setting the standard in their respective industries and present an opportunity for your portfolio. If you’re searching for even more stability and willing to pay the premium price, you can always relax with Disney. Innovation is the only way to succeed in this industry.
The article Why Cable Needs Netflix originally appeared on Fool.com and is written by Kyle Vaughan.
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