Make a Bundle from "Skinny Bundlers" - Investment Ideas
It is not just people in California and Oklahoma that are feeling the ground shake – major cable and satellite companies are seeing seismic movements in viewer’s preferences, and a few companies are capitalizing on the future trend. It has been referred to as “Skinny Bundlers,” or a small inexpensive online television package with just the “popular” channels.
The seismic shift in consumer demand is putting pressure on cable and satellite companies and forcing them to adjust to the times. Companies like DirecTV and Comcast are scrambling to meet the needs and desires of their customers, but they might be too late to meet the changing demands of the online world.
As you would guess, this bundling is putting pressure on smaller and “lesser-known” channels that are not in these skinny bundles, but not as big of a risk that the current cable and satellite providers are facing. To make matters worse, the lesser-known channels are facing further pressure due to the lawsuit brought by Cablevision Systems in 2013, arguing the legitimacy of Viacom requiring the cable company to take these lesser-known channels even though their customers don’t want them.
And that is the crux of the movement: consumers are tired of being forced to pay for channels they don’t like or watch to get the one channel they want. This is why companies like Dish Network, Apple and Sony have created skinny bundles to meet consumer desires.
Not to be outdone, NBC, CBS, Hulu Plus and Noggin are also entering the skinny bundle segment. NBC is set for a year-end launch with original comedy series and shows from NBCU. CBS will include live and on-demand programs from CBS and local stations – but no NFL as of yet. Hulu Plus will offer current and past shows from major networks, and current shows appearing within days of airing. Noggin will offer ad-free programming for preschoolers, but no current Nickelodeon or Nick Jr. shows as of yet.
While this new segment is getting populated with several new competitors, Apple, Dish Network and Sony are the best poised to become dominate in the segment.
Apple (AAPL), a Zacks Rank #2 (Buy) stock, is charging its way into the bundlers market by offering a service of about 25 live channels, with networks like ABC, CBS, FOX and HBO later this fall. Apple TV would be the exclusive digital launch partner for HBO Now. Further, the service will soon be available on Apple iPad devices. It is expected that the service will cost about $30-$40 per month.
According to Apple CEO Tim Cook, “Apple TV will reinvent the way you watch television.” Apple is expecting to expand their devise to music, apps and home automation. Moreover, the application is expected to utilize the A8 system-on-chip, and support Siri voice control of Apple TV. Further, it is expected to include support for Homekit-enabled home automation devices-including control over home lights and garage door openers. The company’s strategy is to create the “mythical digital living room.”
Dish Network (DISH), a Zacks Rank #3 (Hold), was the first cable/satellite company to offer “skinny bundles” in February of this year via Sling TV, with a package of about 20 channels for $20, and another package with local channels and HBO for about $40 a month. These packages are significantly trimmed from the typical bundles that Dish and other TV providers have been offering for the past several years. Further, the package will contain networks like ESPN, and the Cartoon Network (Turner Stations) along with other popular channels.
Sling TV is available on Xbox One, and Microsoft has announced two exclusive limited-time offers for new customers. Current Xbox Live members who have Xbox One will get one month free, and the first 5000 new customers who purchased an Xbox One at a Microsoft store between March 17 and March 22 or online at microsoftstore.com received three months of Sling TV for free.
Sony (SNE), a Zacks Rank #3 (Hold), is entering the fray with their Playstation Vue. Albeit a small regional release, a total US saturation is soon to follow. Currently, the PlayStation Vue is only available in New York, Chicago and Philadelphia. Sony’s offerings are the most diverse of the group, with channels like Comedy Central, CNN, Cartoon Network (Turner Stations) FX and network channels like CBS, NBC and FOX. All these shows are supposed to be available live (on at the same time as they would be on cable or satellite network).
A great caveat is that the PlayStation will act as a pseudo DVR, enabling the customer to “favorite” a show, which then allows the customer to have 28 days of access to the episodes after they have aired live. Due to having more channels, the lower tier “skinny bundle” starts at $49.99. This bundle offers 50 popular channels, movies and sports. Finally, Vue is contract free, so you can order for one month, and then let the subscription expire if you don’t like all the features.
Bottom Line
Skinny bundles will change the landscape of television forever. This seismic shift in viewing preferences and the accessibility of the Web have forced the big cable and satellite companies to adjust to the times. While Dish Network is ahead of the curve, strong competition is coming to the segment. This is great news for the customer, who will now be able to get the channels and offers they want – not just what the big cable and satellite companies say you can have.
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