Over the next 12 months, as much as 10% of U.S. households could cancel their cable or satellite TV, based on the popularity of Netflix and other streaming services, according to the latest surveys from the Consumer Electronics Association (CEA) and Credit Suisse. Continue reading after the jump.
If an Apple-made HDTV is released, pay-TV subscription losses could be even greater if the company offers a la carte pricing, allowing consumers to individually purchase shows, or entire series or channels, investors said.
An Apple flat panel, speculated about in the blogosphere for a while now, gained a bit of credence this week after a note from UBS technology analyst Maynard Um.
“We expect Apple to enter the TV set market and if it achieves similar success as in the handset and PC markets, we see potential for an incremental $50 billion to $100 billion market value,” said the analyst in the report. “Apple’s ecosystem can bring it differentiation in an otherwise commoditizing market. The television set is the one screen where the company is still lacking.”
Even before an Apple TV set began getting some chatter, Credit Suisse conducted a survey last September showing a faster-than-expected “cord-cutting” trend, based on the popularity of Netflix and other streaming services. In a note this week, the firm pointed out the surprising CEA survey from this summer as validation of their earlier analysis and current bearish thesis on media stocks.
“Our prior work suggests that a 10% reduction in traditional pay TV subscribers could result in a 10% decline in cable networks revenue, all else being equal,” said Spencer Wang, consumer Internet and entertainment analyst for Credit Suisse, in a note Monday. “However, the impact on cable networks EBITDA (cash flow) would be even greater — 20% to 25% — given the high fixed cost leverage in the business.”
“Apple has the best opportunity of anyone to build the interface that will connect everything in the home, Apple TV, DVR, cable, music storage, security, etc., into a seamless experience,” said Scott Nations of NationsShares. “Given their expertise in design, they could own a market that’s been ignored for too long.”
