When I got my first “real” job in 2002, making $12 an hour at a local newspaper but with some $40,000 in student loan debt, I had to make some hard budget choices.
One of those choices included cutting cable — and I have never looked back.
I didn’t abandon TV or movies, of course. But my options for replacing programming were pretty thin. Chiefly, my tactics included spinning rabbit-ear antenna in circles and scouring the DVD section at the local library.
These days, however, living without cable is easier than ever before. All major networks provide access to a portion of their original programming on the web. Streaming video services distribute a wider array of shows. Cloud services allow you to store your favorite movies and sitcoms and then watch them on any number of devices.
So what publicly traded companies are at the forefront of this “cord cutting” revolution, and which media companies will dominate in the years ahead? Here’s a short list of companies to watch:
Netflix: The front-runner of streaming video, Netflix (NASDAQ:NFLX) serves more than 27 million streaming customers in the U.S. and over 6 million more internationally. So as a distributor of content, it has a broad reach — and one that is growing after adding another 2 million U.S. subscribers in Q4 to close out 2012. However, Netflix is also moving out of distribution and into content creation. Its recent splash with House of Cards, a political drama featuring Kevin Spacey, is noteworthy because some estimate that as much as 11% of those 27 million customers watched at least one episode — which would mean almost 3 million sets of eyeballs. This original programming push coupled with big investment in international growth is costly and eating into profits, but Netflix clearly is looking to remain the dominant streaming brand. Investors seem optimistic at recent events, too, with NFLX stock doubling since mid-December.
Akamai Technologies: If you like Netflix but want a broader play, consider Akamai Technologies (NASDAQ:AKAM). This stock is a third-party content delivery network and uses specialized hardware to help manage the network traffic and access huge archives of data in an efficient way. Clients include Netflix, Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB), to name a few. Of course, the recent headlines have not been rosy for AKAM. A sales miss and poor guidance after its Q4 earnings back rattled the market, and news it would wind down some media contracts pushed shares down about 14%. However, Akamai stock has bounced back in recent days. It is the largest company of its kind, and as the amount of video and overall demand increases, the kind of services Akamai provides could be crucial to bigger corporations managing data.
Comcast: Of course, you can’t watch Netflix without Internet access. And that means a company like Comcast (NASDAQ:CMCSA) is crucial. While it’s fashionable to consider cutting cable these days, hardly anyone speaks of the need to kill their Internet access. Comcast continues to see decent growth in its internet business, with high-speed Internet accounting for about 25% of 2012 revenue and growing. It’s also worth noting that Comcast isn’t content to just pipe in programming. The company made a splash this week with news it would buy the remaining stake of NBC Universal from General Electric (NYSE:GE) for $16.7 billion. This programming edge allows Comcast to not just make money on distribution, but also on programming — a similar strategy to that described by Netflix above, only Comcast has the deep pockets to buy existing media brands like CNBC and an archive of shows including the ubiquitous Law & Order and its many spinoffs.
Amazon: Another strange hybrid is Amazon.com (NASDAQ:AMZN). The company is in the hardware business with its Kindle Fire line of tablets, but also continues to beef up its Amazon Prime content delivery network. Members can stream on-demand programming for free including Dora the Explorer and Ferris Bueller’s Day Off, as well as purchase more recent or exclusive titles on a show-by-show basis that Amazon stores for customers on the cloud until they want to view it or download it. The model is intriguing because of its flexibility and depth, as well as the low cost of Prime ($79 a year) and its entry-level Kindle Fire tablet (starting at $159). Amazon has had a hard time making big profits with this scheme, but investors seem willing to keep betting on the scale and reach of AMZN. Shares are up 40% in the last year.
Google: This is much more speculative than the other four, but it’s worth noting that Google (NASDAQ:GOOG) has a chance to make a streaming video splash, too. After paying a whopping $1.65 billion for YouTube in 2006, many wondered if the boondoggle would ever pay off. But YouTube is now profitable, ranking as the top video provider on the web with a crazy 150 million-plus viewers and raking in well over $1 billion in profits annually just from advertising. Google also is going the hardware route like Amazon with its line of Nexus-branded devices, and it already dabbles in cloud storage. Google also has the deep pockets and history of innovation to work out a distribution network of its own in the future — or simply buy a smaller company with a big footprint. Google has many options, and is not to be counted out.
- 10 things your cable/internet provider won’t tell you. (WSJ.com)
- An industry group lists the 100 most influential companies in the streaming space. (Streaming Media)
- Should you “binge watch” new streaming shows like House of Cards just because you can? (All Things D)
- This is only the beginning, too … just wait until we see more set-top boxes that allow competitors to reshape the streaming field in years to come. (Mercury News)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he held a position in Apple but none of the other stocks named here.