The balance of power in the broadcasting industry is shifting toward the satellite guys. Enjoy the ride while it lasts, shareholders, and make sure you're ready for the next U-turn.
DISH Network (Nasdaq: DISH) followed up DirecTV's (Nasdaq: DTV) strong report with a doozy of its own. Fourth-quarter sales increased 1.4% year over year to $2.96 billion, while earnings fell 17% to $0.40 per share.
Dish added 250,000 net subscribers in the quarter, to land at 14.1 million customers. That's what sets the satellite operators apart from the cable guys: DirecTV also increased its customer headcount by about 120,000 this quarter, while cable providers like Comcast (Nasdaq: CMCSA) and Time Warner Cable (NYSE: TWC) lost a few subscribers -- 200,000 and 100,000, respectively.
That's the good news that boosted both of the satellite stocks yesterday; aggressive promotional programs and effective advertising are funneling subscribers from cable TV to satellite subscriptions at the moment.
But even the satellite companies need to keep a nervous eye on the rear-view mirror. Dish CEO Charlie Ergen admitted as much when he said that "there is more competition in the industry including the phone companies, but there is also competition coming from IP video, Netflix (Nasdaq: NFLX) or Hulu or whatever." This past quarter, Netflix added 1.2 million new subscribers, and it's catching up to Dish and company fast. That's just one leading example in a large and growing field of online entertainment specialists.
In Ergen's own words, TV programming is becoming a commodity service. Under that kind of model, price and convenience matter more than brand names or the occasional extra feature. Online entertainment providers such as Netflix and Hulu have a cost advantage, because they don't have to pull cable or launch satellites. If broadcasting really is a commodity now, which I think is true, then it stands to reason that the cheaper and more flexible options will prevail. Dish itself is happy to stream its content to your cell phone now, piggybacking on the AT&T (NYSE: T) terrestrial wireless network and Apple (Nasdaq: AAPL) iPhone hardware. So long, satellites -- hello, Dish as a commodity service.
Satellite and cable TV look destined to become impressive footnotes in the history of broadcasting, sort of like black-and-white TV sets or vacuum tube radios. The infrastructure might get new life as dedicated vessels for Internet traffic. All of that is still a few years away from happening, of course, but the true long-term investors among us should ditch the dinosaurs and catch the new wave before online media reaches its true market-crushing potential.
Footnote? Dinosaur? Is Anders a visionary, or has he gone completely bonkers? Let him know what you think in the comments below.
