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Rapid technological advancement is gradually redefining the parameters of telecom service providers and cable MSOs (multi-service operators). The market landscape is fast changing, as these industries are systematically converging. The latest converged battlefield is the over-the-top (OTT) TV streaming service.
Internet TV streaming service is gradually gaining market traction in the United States. Lately, the legacy pay-TV industry has been facing stiff competition from online video streaming service providers. The low-cost over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. Internet TV streaming has emerged as a strong alternative to counter this competitive threat.
Notably, exponential growth of mobile data usage supported by flourishing high-end smartphone and tablet devices has changed the entire dynamics of the traditional pay-TV industry. Presently, the web-based digital media market is growing by leaps and bounds. Digital media brands are becoming immensely popular with the younger generation. With demand for smartphones and tablets on the rise, target customers are increasingly watching videos online, and preferring them over costlier legacy pay-TV connections.
Competition Intensifies in the OTT TV Market
Netflix Inc. (NFLX - Free Report) and Amazon.com Inc. (AMZN - Free Report) are the two leading Internet TV streaming service providers. Statistics reveal that Netflix has more than 100 million subscribers and Amazon has an estimated 60 million Prime TV customers.
Major pay-TV operators, such as AT&T Inc. (T - Free Report) , DISH Network Corp. and Sony Corp. have already launched their Internet TV streaming services. AT&T’s DirecTV Now includes channels such as E!, FX, TBS and TNT. DISH Network’s Sling TV offers channels like ESPN, AMC, Cartoon Network, HBO and Univision. Sony’s PlayStation Vue provides a portfolio of channels like Bravo, Fox News, Nickelodeon and USA.
Apart from these three companies, YouTube TV of Alphabet Inc. (GOOGL - Free Report) and Hulu Live TV also offer Internet TV streaming facilities. In August 2017, The Walt Disney Co. (DIS - Free Report) 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 - Free Report) has deferred the launch of its TV streaming service which is likely to be unveiled next spring.
In September 2017, Comcast Corp. (CMCSA - Free Report) launched its TV streaming service - Xfinity Instant TV – only to its high-speed Internet subscribers. The latest entrant into this league is the third largest wireless carrier T-Mobile US Inc. (TMUS - Free Report) . The company is set to unveil its online TV steaming service in 2018 after its recent deal to acquire Denver–based video technology innovator Layer3 TV Inc.
A major concern for pay-TV operators, who 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, Internet TV service is yet to stop cord cutting, the biggest threat for pay-TV operators.
Bottom Line
An increasing number of customers are using the Internet to watch videos and want mobility of content. This has given TV distributors an opportunity to differentiate their products by offering access to select content through their networks. Nevertheless, 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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Over-the-Top TV Service: Battlefield Set for 2018
Rapid technological advancement is gradually redefining the parameters of telecom service providers and cable MSOs (multi-service operators). The market landscape is fast changing, as these industries are systematically converging. The latest converged battlefield is the over-the-top (OTT) TV streaming service.
Internet TV streaming service is gradually gaining market traction in the United States. Lately, the legacy pay-TV industry has been facing stiff competition from online video streaming service providers. The low-cost over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. Internet TV streaming has emerged as a strong alternative to counter this competitive threat.
Notably, exponential growth of mobile data usage supported by flourishing high-end smartphone and tablet devices has changed the entire dynamics of the traditional pay-TV industry. Presently, the web-based digital media market is growing by leaps and bounds. Digital media brands are becoming immensely popular with the younger generation. With demand for smartphones and tablets on the rise, target customers are increasingly watching videos online, and preferring them over costlier legacy pay-TV connections.
Competition Intensifies in the OTT TV Market
Netflix Inc. (NFLX - Free Report) and Amazon.com Inc. (AMZN - Free Report) are the two leading Internet TV streaming service providers. Statistics reveal that Netflix has more than 100 million subscribers and Amazon has an estimated 60 million Prime TV customers.
Major pay-TV operators, such as AT&T Inc. (T - Free Report) , DISH Network Corp. and Sony Corp. have already launched their Internet TV streaming services. AT&T’s DirecTV Now includes channels such as E!, FX, TBS and TNT. DISH Network’s Sling TV offers channels like ESPN, AMC, Cartoon Network, HBO and Univision. Sony’s PlayStation Vue provides a portfolio of channels like Bravo, Fox News, Nickelodeon and USA.
Apart from these three companies, YouTube TV of Alphabet Inc. (GOOGL - Free Report) and Hulu Live TV also offer Internet TV streaming facilities. In August 2017, The Walt Disney Co. (DIS - Free Report) 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 - Free Report) has deferred the launch of its TV streaming service which is likely to be unveiled next spring.
In September 2017, Comcast Corp. (CMCSA - Free Report) launched its TV streaming service - Xfinity Instant TV – only to its high-speed Internet subscribers. The latest entrant into this league is the third largest wireless carrier T-Mobile US Inc. (TMUS - Free Report) . The company is set to unveil its online TV steaming service in 2018 after its recent deal to acquire Denver–based video technology innovator Layer3 TV Inc.
Disney carries a Zacks Rank #4 (Sell), while Netflix has a Zacks Rank #2 (Buy). All other stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cannibalization a Major Concern
A major concern for pay-TV operators, who 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, Internet TV service is yet to stop cord cutting, the biggest threat for pay-TV operators.
Bottom Line
An increasing number of customers are using the Internet to watch videos and want mobility of content. This has given TV distributors an opportunity to differentiate their products by offering access to select content through their networks. Nevertheless, 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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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