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A Dimmer Future for Cable Operators

By April Taylor - Updated Apr 6, 2017 at 1:48PM

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Will young consumers cancel cable?

The future doesn't look too bright for cable. Since the start of the year, two significant skirmishes between cable operators and content owners have angered customers and drawn media derision. First, News Corp (Nasdaq: NWS) threatened to block Time Warner Cable's (NYSE: TWC) transmission of its Fox station, with a detente occurring just ahead of a weekend filled with the top-tier college bowl games.

More recently, Disney (NYSE: DIS) and Cablevision (NYSE: CVC) engaged in a similar fight, leading to ABC's removal from Cablevision's lineup early Sunday morning. The station was flipped back on shortly after ABC's Academy Awards broadcast began later that same night.

While the companies involved did not reveal the details of how they settled the disputes -- or came to a temporary cease-fire, at least -- it appears that the cable companies gave up some ground, or some dollars, to the content owners in both cases.

With an ever-increasing expansion of distribution channels -- Netflix (Nasdaq: NFLX), Apple's (NYSE: AAPL) iTunes store, and Hulu online, in addition to the FIOS offerings of traditional telecom competitors such as Verizon (NYSE: VZ), cable companies have seen their power over content distribution wane.

At the same time, consumers are increasingly turning to online venues for television content, making a pricey premium cable TV bundle less of a necessity. A recent study by Conference Board / TNS Compete reported that 25% of all U.S. households watched some TV online.  Younger consumers aged 18-24 are watching more than five hours of video per month online, according to Nielsen. Neither of these trends is positive for cable operators.

Look for cable-operator-vs.-content-owner disputes to become more common, especially on the eve of major televised events best watched live. That said, don't look for NBC to be party to one of these spats, given its pending sale to Comcast.

If you had to invest in one cable company or one content provider, which company would it be? Leave your thoughts in the comments box below!

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$602.13 (-2.33%) $-14.34
The Walt Disney Company Stock Quote
The Walt Disney Company
$146.22 (-0.67%) $0.98
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$51.42 (1.36%) $0.69
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.

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