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Unless you're a huge fan of superhero movies, 2013 has been an exceptionally bad year for film. Summer blockbusters like After Earth and The Lone Ranger bombed at the box office, while films such as The Hangover Part 3 and Jobs were universally panned.
But as bad as film has been in 2013, TV has been just as good. In large part, that's due to Netflix (NASDAQ: NFLX ) . Both for its own original programming (House of Cards, Orange is the New Black) and for its catalog of shows from other networks (Breaking Bad, Mad Men, among others).
The VOD revolution
If there's one factor that's driving TV's dominance, it's video-on-demand services. Breaking Bad's creator, Vince Gilligan, told Bloomberg that if it wasn't for VOD, his hit show might've been cancelled in its second or third season.
Breaking Bad is a highly serialized show, where one episode often picks up exactly where the previous one left off. It's almost impossible for a viewer to just start watching in the middle of a season -- if you're going to enjoy the show, you have to start from the beginning. Other popular shows like Homeland and Game of Thrones follow a similar format.
Netflix has benefited from this trend, making old seasons of currently running programs available to its subscribers. It has also pushed the format to its logical conclusion, offering its own original programming in full-season blocks.
TV shows to replace film
Kevin Spacey believes this format represents the future of video entertainment. In a speech at the Guardian Edinburgh International Television Festival, he argued that this kind of long-format, on-demand TV show was ideal for storytelling:
I predict that in the next decade or two, any differentiation between [film and TV] will fall away. Is 13 hours watched as one cinematic whole really any different than a film? Do we define film as something being two hours or less?...And the audience has spoken. They want stories. They're dying for them...they will talk about it, binge on it, carry it with them on the bus and to the hairdresser, force it on their friends, tweet, blog, Facebook, make fan pages, silly jifs, and God knows what else about it. Engage with it with a passion and an intimacy that a blockbuster movie could only dream of.
Obviously, Spacey is a bit biased, given that he stars in House of Cards, Netflix's new hit show. But he's also appeared in dozens of Hollywood movies, and has won two Academy Awards.
AMC's original programming is fantastic
House of Cards is a great show, but AMC's Breaking Bad and Mad Men are just as good, if not better. AMC doesn't have much of a digital-distribution platform but owns the rights to some fantastic content.
AMC has been a great stock to own over the last year -- shares are up nearly 60%. That rally has been prompted by impressive financial results. Most recently, AMC reported better-than-expected results for the second quarter, with net revenue increasing 16% from the prior year.
On its most recent earnings call, management cited AMC's original programming as being a key driver for the company's performance, citing Mad Men and The Killing specifically.
HBO started the trend
And while AMC may have risen to prominence in the last few years, HBO has been doing it for well over a decade, with The Sopranos starting the trend back in 1999.
HBO is just a part of Time Warner, but it's a pretty significant chunk. Unfortunately, Time Warner doesn't break out HBO's results from its other networks, but the last time it did, in 2009, HBO generated about 15% of Time Warner's revenue (as per Forbes). Granted, 2009 is several years ago, but given that HBO's base of domestic subscribers has remained relatively stable -- near 30 million -- over the past few years, HBO's performance likely hasn't changed significantly.
But perhaps HBO could grow its subscriber base if it offered the network as a stand-alone product similar to Netflix. HBO's app, HBOGO, is -- from an interface perspective -- every bit as good as Netflix, and can be accessed by anyone with an Internet connection.
But you need a cable subscription to sign up for HBOGO. There have been rumors that Time Warner is considering offering HBOGO a la carte, but to date, management has downplayed that possibility.
Investing in a post-film world
If 2013 is any indication, the future of video entertainment lies with television -- not film. The rise of VOD services like Netflix has made highly serialized programming possible, and from a storytelling perspective, a long-format TV show has advantages over a relatively short film.
Obviously, Netflix benefits both as an owner of content and a platform for older shows from other networks. AMC is more of a pure play on the actual content, while Time Warner's HBO subsidiary is a mix of both. Nevertheless, all three stocks should benefit if this trend away from film and toward TV continues to play out.
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