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The Best Way to Play This Massive Trend

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Austin Smith: I've got two questions.

You say one of the big trends for 2013 is maybe a resurgence in TV sales. What is the best way to play that? Is it a component play? Or is there a play? Is it a Corning or Universal Display Corp., or is it maybe a candidate that looks like they could be ripe for disruption?

Disney, with their ABC line, actually has a great suite of stuff that they can... The ESPN brand is basically almost all the value you get in a cable package anyway, so how would you suggest playing it, or is it just something that you have to watch and let filter out a little bit first?

Eric Bleeker: Yeah. I'll mention some and kick it to Andrew as well.

Apple's $156 billion top line. You look at the television market, it can be very substantial. One of the problems is, too, it's hard scaling globally as fast as you could other products like a smartphone, just with some of the content deals.

I think you do want to go down to the component suppliers, and you do have a company, in Corning, with a dominant market share of display. It's the same story that happened with PCs. PCs didn't die because people stopped having PCs in their homes; they stopped buying new PCs.

We've stopped buying new televisions. As soon as that refresh cycle starts, you're going to have Corning really taking off. I think it's a fantastic play for 2013, and potentially beyond.

Other things like Universal Display are interesting, but I will say because of the units game I'm not going to think of them as a television play. I'm going to think of them first and foremost as a smartphone play remaining.

What are your thoughts?

Andrew Tonner: I'd have to agree. I think Universal Display, at this point, is really more just a speculative potential disruptor, but it's not going to gain the widespread adoption you might think with a new TV market.

I think another interesting tangent off of that, too, would be keeping with the theme of unbundling of cable. Does this open another opportunity for some of the streaming plays that have been so popular in years past, like a Netflix, for instance?

A company, now, that the way you would consume it would be an attached device or something. Does this open up the floodgates of an entirely new consumer base? People that are plugging these ecosystems into their walls now, versus maybe they weren't tablet adopters; does that open up a huge amount of new subscribers for them as well?

I think it's an interesting story, and a real potential opportunity for them. But at the same time, I'm not necessarily in love with the streaming game. I think there's enough competition and not enough product differentiation now. It's not a great growth story, but at the same time it could open up some potential for them.

Eric: Yeah, and I think we want to be realistic with ourselves, too. If you went back to the iPhone in 2007 and said, "How's the smartphone market going to play out?" No one could have really predicted then. We're at that point, kind of, with the unbundling of media. There's so many avenues to go.

Netflix will have a lot of very interesting potential. What I look at in the space, that I find may be really interesting; how long is Amazon going to do what they're doing? You look at the amount that they're spending on content.

It's not as much as Netflix -- and so much of this is classified -- Amazon won't tell us anything, but still you look at the amount of bandwidth and content that Netflix can be; a percentage of Internet traffic. Amazon never stacks up anything close, yet they're trying to pay as much...

They throw their streaming on as an added thing for their Prime service, but I don't think users are getting the imputed value from it that they do buying a Netflix subscription, so how long is Amazon going to follow this strategy?

They have a lot of patience, but I think consumers do want to go, "OK, if Amazon were to throw in the towel on streaming, or not make it just a tie-on for Prime, could that be a huge catalyst for Netflix?" That might be coming in the next couple years. Don't sleep on that.

Austin: Well, and to take the devil's advocate there, you also have another deep-pocketed competitor coming online with Redbox and Verizon. They're going into the same thing; they're going to have the same monthly subscription price tag as Netflix and Amazon, but they're going to have a slightly different model.

You're still going to get unlimited streaming, but you also get four daily DVD rentals. It's just that one little differentiator above Netflix, and slightly different than Amazon, but even if Amazon vacates the premise, it may not necessarily be a vacuum for Netflix because you'll have another competitor there. We don't know how strong they'll be, but they've got Amazon's backing, which is certainly good to have.

Eric: That's an entirely fair point. I just tend to discount telecoms from innovative areas, because they have a poor track record, but I think that's a fair thing, definitely, for investors to watch.

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