Telecom-Cable TV-Media Convergence Becomes Inevitable
Zacks Investment Research | Jun 12, 2018 09:14PM ET
Adversity makes strange bedfellows or in this case competition. Rewinding 7-8 years, telecom and cable operators were jostling and vying for a share of each other’s territory with media industry acting as a content supply chain to both.
Cut to now, fierce competition from tech behemoths have completely altered the market landscape, compelling telecom, cable TV and media operators to band together in order to survive.
Competition Intensifies in Telecom Space
U.S. telecom market is witnessing cut-throat pricing competition. Two large incumbents — Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) — are bearing the brunt of this competition.
Consolidation of wireless industry, entry of cable TV giants like Comcast Corp. (NASDAQ:CMCSA) and Charter Communications Inc. (NYSE:T) and the decision of tech behemoths like Alphabet Inc. (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL) to foray into the telecom space has intensified the competition
Pay-TV Industry Facing Survival Threat
Exponential growth of mobile data usage supported by flourishing high-end smartphone and tablet devices, has altered the entire dynamics of the traditional pay-TV industry.
Consumer preference has shifted from costlier legacy cable TV connections to low-cost over-the-top (OTT) video streaming service, resulting in significant cord cutting. Tech giants Netflix Inc. (NASDAQ:NFLX) and Amazon.com Inc. (NASDAQ:AMZN) are the two leading Internet TV streaming service providers.
Digital Platform: The Next Battle Field
In order to derive maximum synergy from the combined video content and video distribution platform, telecom, cable TV and media operators are aggressively penetrating the digital advertising technology market. Inclusions of dynamic ad-insertion, targeted audience advertising and data-driven TV advertisements are steps toward the same objective.
This advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting. Currently, tech behemoths like Alphabet, Facebook (NASDAQ:FB) and Twiter are major beneficiaries of digital advertisements.
Integration of Telecom-Cable TV-Media: A Survival Strategy
Rapid technological advancement is systematically redefining the parameters of the telecom, cable TV and media industries. Vertical integration of distribution and content creation will create a unique platform to serve any sort of communications, broadcasting along with a vast area of entertainment industry.
Consider the case of AT&T, which recently received court’s approval to acquire Time Warner Inc. (NYSE:TWX) in $85.4 billion deal. AT&T will now have nationwide high-speed mobile and broadband network, online TV streaming services, a large TV broadcasting network, HBO assets and film production network.
This is definitely a ploy to take on the challenges of Silicon Valley tech behemoths. AT&T currently a Zacks Rank #3 (Hold). You can see Zacks Investment Research
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