There are few things more American than television, but the visual entertainment industry is in the midst of a major shift. New technologies are emerging, and we're starting to cut the cord. As a result, four specific segments have emerged: cable and satellite, streaming video, TV enhancement, and advanced options.
Over the course of this series, I've looked at each and highlighted the major players. In Part 1, I looked at the cable and satellite providers. In Part 2, I considered the role of the streaming video players in the shifting landscape. In Part 3, I explored the services that look to enhance the television experience. Finally, in Part 4, I looked at the advanced options that are looking to completely change how we watch TV. Now that we've investigated each of these segments on its own, aggregating them and considering where the industry is going has a much richer context.
Looking ahead
While there are solid investments in each segment, if you take a longer view, the companies that can not only lead but also adapt are the ones that will perform best over the long haul. With the Internet likely to become of increasing importance, the ability to make this jump and still provide content are two of the most critical factors to watch. As it turns out, I believe there are four companies that are best positioned to lead -- at least as things currently stand -- and these are the investments that I would be focused on for my own portfolio.
Comcast (CMCSA 3.20%): While Comcast falls into the traditional provider category, the company is already taking steps to stay in the game after the industry evolves. The purchase of NBC will give Comcast access to critical content, and the company's nationwide network for broadband delivery will keep it in the game. In addition, because the company is already well entrenched with customers, it should have a "right of first refusal" for some time -- meaning if Comcast offers a viable option that's easy for customers to switch to, they may choose to stay with the provider they know. You shouldn't underestimate people's wish to avoid installation visits.
Amazon.com (AMZN +0.55%): While Amazon has not established itself as the go-to player in streaming video yet, its balance sheet will allow it to simply out-buy its competitors in terms of content. When you factor in the company's ability to operate in the cloud, and cross-sell merchandise, as nontraditional plays become more accepted, the advertising revenue synergies shouldn't be overlooked. Finally, with rumors that Amazon is looking to make the jump into mobile, it becomes increasingly interesting both now and over the longer term.
Google (GOOG +0.66%): This is my favorite play in the space because of how successful Google may become, and because of all the things it's doing beyond this arena. Chromecast is putting it squarely into the home entertainment game now -- with an affordable product that people want -- but YouTube is the long-term play for Google. Not only do I believe that major content providers will offer YouTube channels at some point, but the ease of use and delivery is also such that content itself may become more decentralized. The level of content offered on YouTube has already taken monumental leaps forward since Google bought it, and as production costs continue to drop, independent content providers are likely to proliferate. This will play to Google's strengths, both in terms of search and advertising. Ultimately, I think Google belongs in most portfolios.
Intel (INTC +13.79%): The last company that I think makes the top-choice list is Intel. While still unproven in the arena, Intel is leaping headfirst into Internet TV and may ultimately change the conversation. Just as we all came to expect that our PCs had "Intel Inside," so too could our TVs. Intel has boldly begun to push the envelope in Internet TV, and with its close ties to mobile, some of its allegiances could get interesting. While this is clearly a longer term play on Intel's OnCue service, I believe Chipzilla will succeed and deserves a place in your portfolio.
Conclusion
As the television industry continues to change in terms of content, delivery method, and preferred devices, investing ahead of these trends will require vigilance. The technologies involved are largely new and subject to rapid change. With that in mind, each of the four companies I've mentioned here is well positioned to perform and, I believe, represent a best-in-class choice.
