Netflix (NASDAQ: NFLX ) can take its Internet-based video and go home -- it's the end of cord-cutting as we know it, and the cable industry feels fine!
Well, it's a little early to declare a sustainable victory for cable and satellite providers. For one, the bulk of the industry will report their results over the next three weeks, leaving plenty of room for industrywide surprises. Comcast's gains might be local to that company alone. We'll get back to Verizon's situation in a moment.
Then, the fourth quarter is one of the seasonal high points in this industry, like so many others. This was Comcast's first quarter of positive video trends since 2007, but adding a few subscribers in what's traditionally your strongest season doesn't mean that the long-term trends have turned. It's more like rejecting the scientific reality of global warming because, you know, it was cold last week.
Indeed, Comcast's positive fourth quarter could not overcome nine months of steady bleeding and the largest cable provider ended 2013 with 300,000 fewer video customers, year over year. This was Comcast's fifth straight year of annual video subscriber losses.
Don't cry for Comcast, because the company is adding bucketloads of new accounts to its broadband Internet and digital voice packages. The triple-play package is alive and kicking. Converting plain TV subscribers to triple-play customers is a key part of Comcast's growth strategy.
In fact, Netflix can't do its video magic without help from the Comcasts and Verizons of the world. Take the two macro trends of growing online video and fewer cable subscribers to their logical conclusion, and you'll get the cable guys simply providing the broadband pipe for the real kings on digital video.
This is why Verizon stands apart. FiOS video is actually a broadband service too, as every frame of your cable TV viewing is delivered as bog-standard Internet traffic via the FiOS fiber link, then decoded by your set-top box. Turning this into an ISP-agnostic service would not be difficult, and Verizon is probably working on something like that behind the scenes.
So Netflix isn't exactly on the run in Comcast's territories. Cords are still being cut in general, despite this single-quarter anecdote. If the company wants to be anything other than a simple Internet pipe for Netflix and HBO Go in the next era of home entertainment, Comcast needs to come up with a digital content plan of its own -- and then beat the early leaders at their own game.
Good luck with that. This is why I own shares of Netflix, but not Comcast.
Who's winning the trillion-dollar war for your living room?
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