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Where's the Cord-Cutting Trend Headed Now?

By Motley Fool Staff – Nov 21, 2018 at 9:35AM

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The streaming-video disruptors keep changing the game, but legacy pay-TV providers are not standing idly by.

When people first began discussing the theory that consumers would begin giving up their pricey cable television subscriptions en masse, it seemed like a distant threat, because the alternatives just weren't all that impressive. Fast-forward to today, and the trend is far more obvious. Netflix (NFLX -1.03%), Hulu, YouTube and others allow us to get enough of our entertainment needs met without a traditional cable bundle.

On the other hand, as MarketFoolery host Chris Hill and analysts Jason Moser and Taylor Muckerman point out in this segment of the podcast, the savings to be found from cord-cutting are getting smaller as the prices of the replacement options -- and for high-speed internet -- rise. They also have some recommendations for the shows they're watching now.

A full transcript follows the video.

This video was recorded on Nov. 19, 2018.

Chris Hill: Here's one more thing folks can talk about at the table at Thanksgiving if the conversation turns to politics, and that is entertainment. Most people like entertainment. From a business standpoint, you pointed this out earlier today, Jason, the trend that we've seen over the past few years continues. More and more people are cutting the cord.

Jason Moser: It's not surprising. I certainly remember not all that long ago saying, "I want to keep the cord." I like having that optionality out there. And it came at a price. Our Verizon bill every month for that option was going on, $150. For me, what really changed my mind was when Hulu came out with this skinny bundle offering. YouTube has one, very similar. We're seeing more and more now that not only are these modern content providers coming out with those options, but we're seeing that the legacy providers are having to do the same thing. It's changing the bundle. But we are getting to a point where it feels like now, that cost justification doesn't quite exist like it used to, unless you're willing to make sacrifices. And some people are, and that's fine. Some people are very happy just to have that Netflix subscription, and that's all they really want anyway.

But it used to be that it was either Netflix or cable. You had to choose. Now, it's not so. It could be cable or any number of different apps and services that you want to piece together if you like sports, news, entertainment, whatever it may be. From the perspective of a consumer, it's really nice. You can get what you want, when you want. But you're starting to pay for it. And I'm telling you right now, Netflix ain't lowering that price. They are not lowering that price, no. You're going to see more and more, whether it's ESPN+ or Disney+ or HBO or Netflix or Hulu -- thankfully, Amazon is able to build their streaming service into the Prime relationship, and you don't really think about it. The prices are going to up because that's just the direction that this goes. So, we get back to where we started. [laughs] I'm not sure I'm not sure what to make of all of that. But that's where we are.

Taylor Muckerman: The one cord you're not cutting is your internet cable. That's the base of all of this. You still look at companies like Comcast and Verizon and Time Warner that are providing this internet service, I think that portion of the bill is probably going to go up a little bit more if people continue to cut the cable or the telephone portion of the bundle out. Maybe once Netflix or these other companies bump up against a little bit of a subscriber growth issue, they can partner with Verizon. Instead of selling an internet-cable bundle, you sell an internet-Netflix bundle or something like that. I'll be interested to follow the whole Comcast-Disney situation here with Hulu. Disney bought into the Sky Network with Fox, and now they own 60% of Hulu. Comcast still owns 30%. A little bit of a competitive market there, owning the same bundle service. It'll be interesting to see if Comcast holds onto that, or maybe ships it for a few billion dollars to Disney to give them 90% control, and see how that plays out. That's one of the more interesting situations in this whole cut-the-cord bundling situation.

Hill: What are you watching these days, in terms of entertainment? I'm assuming it's streaming as opposed to a traditional broadcast TV show?

Moser: I saw that the new season of Narcos is out on Netflix. That, frankly, is the only series on Netflix I've ever felt like I wanted to watch. I'll probably catch up on that. And then, another one. I went digging back last week on Amazon and HBO. They have an old HBO series called Carnivàle. It only went on for two seasons.

Hill: Oh yeah! I remember that.

Moser: I had read some really good reviews about it, so I gave the first couple of episodes a shot. It's pretty compelling. I want to watch the story play out.

Muckerman: Narcos, I just started the new season, it's also a new direction. It's in Mexico now versus South America and Colombia. Two episodes in. That's one of the few shows that I'm watching. Ozark is over for the season, Billions is over until the spring, so I'm all in on Narcos.

Hill: I just started rewatching the first season of Goliath on Amazon Prime, just because I so enjoyed that series.

Muckerman: Is that Billy Bob Thornton?

Hill: It's Billy Bob Thornton, down and out. The first season, as you said before, Jason, a little dark. Second season gets a little darker. But that that first is just phenomenal storytelling.

Moser: Speaking of phenomenal seasons, the one that stands out to me to this day, an HBO series called Boardwalk Empire. Season three of Boardwalk Empire may be the best season of anything I've ever seen. The story that it told, and it incorporated a character -- Bobby Cannavale is the actor who played Gyp. Man, great story, good series. Season three of Boardwalk Empire is on-point.

Muckerman: One of those shows where you have to watch --

Hill: I was going to say, I'm a little bummed that you said season three. I have to go through the first two?

Moser: You could probably watch season three and it would stand on its own. I would recommend the whole series. With that said, each episode is exhausting. It's like watching The Untouchables every time you watch it. It's great, but you have to commit like a year to it.

Hill: That's good. I feel like those are the types of things that you need to hear from friends who recommend series. What people often hear is "Watch this! It's great!" And the second level of information is, "It's a comedy, it's a drama," that sort of thing." But I always appreciate when it's like, "Look, it's a great show, but you're going to need a nap after each and every episode."

Moser: "How much time does this guy think I have?"

Hill: It's draining to watch this show. It's great, it's phenomenal storytelling, and it's exhausting.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of AMZN. Jason Moser owns shares of AMZN. Taylor Muckerman owns shares of AMZN and CMCSA. The Motley Fool owns shares of and recommends AMZN and Netflix. The Motley Fool recommends CMCSA and VZ. The Motley Fool has a disclosure policy.

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