Over the last few years, there has been a significant shift in how we consume digital content from music and movies to books and television (TV). The intersection of new technologies, devices and high speed networks has served to accelerate that change, particularly for TV. If we were to hop into the way back machine, it?s hard to believe that TV consisted of only a handful of channels, programming ceased at some point each night and the picture was in black & white, not color let alone 3D. Yet for all the changes we have seen, the recent past and the coming future are poised to radically shift TV to the point that other than live sporting events and maybe news, we may not be able to recognize broadcast TV any longer.
Video on demand (VOD) has become a staple of the cable companies ranging from Comcast Comcast and Verizon Communications Verizon Communications to Cablevision Cablevision and Charter Communications Charter Communications. Streaming services from not only Netflix Netflix and Apple Apple, but also from the aforementioned Comcast and Verizon Communications (check their iPad apps) and HBO as well as others is fueling not only the time shifting consumption of content we have come to rely on in this post Tivo world, but also fostering place-shifting as well. Watch any teen or ?tween and they firmly expect to watch what they want, when they want but where they want and on the device they want.
With smartphone penetration well past the tipping point and tablet sales maturing, many companies are turning their sights on the next battlegrounds. One of them is the Connected Car and another is the Connected Home. Inside that Connected Home, there will be several battlegrounds ? security, home automation (temperature, appliances and so on) and the living room. How that all shakes out has yet to be determined, but rest assured while companies like AT&T, Verizon, and ADT are working on the first few, Apple, Google Google, Microsoft Microsoft, Slingbox, Roku and others are targeting the living room as part of their digital content offering.
Apple TV. Apple has shipped more than 13 million Apple TV units and at the recent D11, CEO Tim Cook shares that TV is not just a hobby, but rather the company has a ?grand vision.? Rumors over the next iteration of Apple TV continue and before too long that rumor mill is likely to kick into high gear once again as Apple prepares for the official unveiling of iOS 7. Like the soon to be released iRadio, Apple TV is a work in progress, which means we keeping our eyes and ears open on this digital content streaming and portal device. Combined with the full power of Apple?s digital hub ? iTunes ? it could be a powerful new weapon for Apple as well as a very sticky one for consumers.
Google?s Chromecast. Last week, Google introduced a potential game changer to media consumption in the form of Chromecast, a $35 thumb drive sized device that that plugs into the back of your TV, allowing you to stream content from any device. Well almost any device. If you have an Android tablet or smartphone, an iPad or iPhone, use Chrome for Mac and Windows then you are in luck. If you use a BlackBerry or Windows Phone,? at least for now you will be stuck using either a PC or tablet. This just introduced product has already sold out online at Best Buy, Amazon.com, and Google Play.
Aereo ? one to watch. While both Apple TV and Chromecast allow for the streaming of TV and other digital content, it is Aereo that has or at least should have the major broadcast ? TV networks ? Walt Disney Walt Disney?s ABC, CBS CBS, Comcast?s NBC and News Corp News Corp.?s Fox ? concerned if not? worried.
Backed by IAC?s Barry Diller, Aereo is a Web video service that offers local TV channels and a DVR-like service, which can be viewed on a PC or Mac, iPad, iPhone, Apple TV or Roku device.? While Aereo doesn?t support Android as yet, given the existing support for Google?s Chrome browser one has to wonder how long until it and Chromecast are supported. Currently offered in New York, Boston and Atlanta, Aereo has plans to expand to another 20 markets, with Salt Lake City in August and Chicago in September.
Arguably, success at Aereo poses a problem for the broadcast industry in that it collects fees to the tune of billions by allowing cable networks access to local channels. Like any company that sees a high margin revenue stream under potential attack, last March, broadcasters filed two federal lawsuits accusing the service of violating copyright law. In March, a New York federal appeals court upheld a ruling in favor of Aereo. Given the fees and profits at stake, it?s more than likely we have not heard the last of this. I for one can?t wait to sample Aereo?s service as the company expands its footprint in the coming months.
How to invest in this? Whenever I see so many companies looking to compete in one market, I tend to step back and look at the food chain or ecosystem for those players that offer critical solutions vs. commodity components and serve many of the would be players. A great example of such a merchant supplier in the smartphone and tablet space is Qualcomm Qualcomm, which counts Samsung, Apple, LG, HTC and most if not all the other key players as customers.
In this digital content and Connected Home battleground, the teardown analysis on the latest Apple TV unit and on a Chromecast performed by iFixIt.com as well as similar analysis on the Roku 3 and the Slingbox 500 reveal key supplier to be Toshiba, Broadcom Broadcom, Marvell Technology Group Marvell Technology Group, Micron, Atheros (now owned by Qualcomm) and AzureWave (TPE:3694). Toshiba and Micron are supplier of NAND flash memory, while the key connective technologies are provided by Broadcom Broadcom, Marvell and Atheros/Qualcomm. It?s the latter group of companies that investors should be focusing on.
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Disclosure. Subscribers to PowerTrend Profits were alerted to the long-term investment opportunity in Qualcomm shares on April 9th.
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