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Here's Why Comcast Is Like Gulliver

Like Gulliver, Comcast is attacked by tiny tormentors on all sides.
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Media stocks Disney (DIS) and Comcast (CMCSA) took a beating on Thursday, as both companies faced the new realities of the evolving digital age. Both companies issued disappointing forecasts that caused traders to hit the sell button. Disney fell by 4.38%, and Comcast slipped by 6.24%.

Disney's ESPN sports network continues to bleed subscribers. The company also blamed incoming hurricane Irma for causing cancellations at the Disney World theme park in Orlando.

Under no circumstances would I be a seller of Disney. The company inspires loyalty by providing unique and superior experiences via cruises, theme parks, and films. Disney's classic films might still be popular centuries from now. I'm not sure if a metric has been created to measure the value inherent in that.

ESPN continues to be a thorn in Disney's side. The company paid $24 billion for the right to telecast NBA games for nine years, a deal which will haunt it through 2025. ESPN is saddled with daunting commitments, and must try to meet them with an ever-dwindling customer base.

While ESPN will continue to be a problem for years, it won't sink Disney. The company is planning to bypass cable providers and Netflix NFLX with a direct-to-consumer streaming service for its Star Wars and Marvel films. Those films should generate revenue for decades to come.

Comcast is in a different situation, as customers don't have the same degree of loyalty toward it. For the most part, programming providers offer similar products. Because of this, Comcast faces a danger that customers will abandon it at the first opportunity to obtain a similar service at a better price.

Bundled services are becoming more pervasive, and new, less expensive packages from AT&T/DirecTV T promise to siphon away additional Comcast customers. However, some drastic price offerings have begun to appear.

For example, Spotify and Hulu are now offering a bundle for college students for just $5 per month. T-Mobile recently announced an unlimited data plan that includes Netflix (NFLX) for free. Comcast is like Jonathan Swift's Gulliver -- a giant beset from all sides by tiny tormentors.

Consumers have more choices than ever, and viewership habits are changing. One of the agents of that change, Alphabet's (GOOGL) YouTube, is offering a bundled TV service for just $35 per month. At some point, will Comcast be forced to offer a low-priced bundle to stem an outflow of subscribers? If so, it could be faced with a difficult choice: cannibalize its own business, or serve a smaller customer base.

Disney and Comcast aren't going to solve these issues overnight. Disney's problem with ESPN, while troublesome, seems fairly well contained. I'd use this current bout of weakness to buy or add to the stock.

Comcast's issues are broader. When we consider the long list of industries that have been disrupted and decimated by technology in recent years, can we guarantee that in the future, cable TV won't be listed among them? I'm avoiding this sector for the time being.

At the time of publication, Ed Ponsi was long DIS, although positions may change at any time.