Monday, December 14, 2009

Death of TV Is Near

Newspapers are dead. We all know that. Mr. Murdoch is trying to stop that, with about the same level of success as a horse can stop oncoming train.

All predictions about the Internet are coming to life. TV is the next to go. I thought that we have about 10 years before that, but this article in New York Times completely changed my mind. If you have high speed internet connection, you can get rid of cable right now. Well, people in the article are still watching the good old TV shows, but that's not for long. There will be new ways of video shows production which will completely change what we watch. Like blogging is killing traditional journalism, successors of Youtube will change video.

Youtube is not there yes. There will be something else. And this something else will appear, have no doubts about it. We live in a brave new world, internet is changing everything.
From investing perspective, new developments mean:

1. Cable companies are going to become internet providers, mostly. There will be some people paying for cable for some time, but their numbers will decrease. Cable companies are not good places to invest. The future of satellite companies doesn't look very bright either.

2. TV networks are not going to die very soon. They will play with different internet distribution models and some of them are going to survive in the end. But I wouldn't invest long term in any of them.

3. Hollywood is going to change or die. I thought that DVD is going to be prevailing distribution channel for a long time, looks like I was wrong. I'd give it about 5 years, after that it's going the way of VHS. Which means that current Hollywood model, getting most of the money from selling and renting DVDs, is not going to work after that. Internet distribution is the key to survival. But that would be the smallest problem of Hollywood. Much bigger problem is sharply reduced barriers to distribution. You don't need to print tens of thousands of DVDs. Just rent some server space with good connections (available in the clouds right now). Making a good movie is still requires art, but it doesn't always require much money, as Blair Witch Project proved.

4. Netflix (NFLX) is the best internet movie distribution system right now, and taking over DVD distribution. Despite that success, I don't expect outright victory for Netflix in the 'net. There will be very tough competition. I don't know where it's coming from. Not from Hulu or iTunes.

Full disclosure: at the time of publication author had a long position in NFLX. Positions can change any time.

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