Netflix Faces Competition from Pay-TV Providers

Netflix (NFLX) continues to be the undisputed leader in the video streaming market. However, competition has increased recently. Comcast (CMCSA), the largest pay-TV provider, announced on July 12, 2015, its new streaming TV service called Stream, priced at $15 per month. Stream will be available only to Xfinity Internet customers in Boston later this year.

Dish Network (DISH) is also offering an OTT (over-the-top) streaming service called Sling TV priced at $20 per month. Other media companies have also launched OTT streaming services. Time Warner (TWX) has HBO Now priced at $15 per month, and CBS (CBS) offers an online streaming service called CBS All Access, which it launched in October last year.

According to an IAB (Interactive Advertising Bureau) report and as the above chart shows, online digital video viewing is increasingly popular among consumers who are 18–34 years old. These viewers, who are sometimes called “cord-cutters” or “cord-nevers,” have either stopped subscribing to pay-TV or have never subscribed to it. Video online streaming companies like Netflix and Hulu have helped drive these viewers away from pay-TV.

Pay-TV providers like Comcast and Time Warner Cable (TWC) are losing subscribers to the cord-cutting phenomenon. That’s the reason media companies and pay-TV providers are launching their own OTT streaming services to entice these cord-cutters to come back. You can get a diversified exposure to Comcast by investing in the iShares US Preferred Stock (PFF), which holds 0.45% of the stock.

It remains to be seen how Netflix will counter this competition from pay-TV streaming service providers.