How AT&T and Comcast Are Changing the Industry: Jeff Kagan

Jeff Kagan  |

Image source: AT&T

Let’s take a closer look at what we can expect to see going forward from companies like AT&T and Comcast, their competitors and, in fact, the entire industry in 2021. This impacts sectors like wireless, telecom, pay TV, Internet, entertainment, news and more. Having an accurate understanding of the changing marketplace is key for every investor, customer and worker.

First, change is not new. These industries have been growing and changing independently for decades. Remember years ago, we had separate industries like local and long-distance telephone, cable TV, wireless, Internet and more.

In recent years these sectors have been coming together, and many, if not all, of these services are being offered by single companies today.

That massive transformation is only continuing.

Now, certain companies like AT&T and Comcast are acquiring more segments like movies, news and entertainment and starting another sector.

AT&T and Comcast's core businesses are as strong as ever

Disney is in a similar boat. The company is expanding and changing as well. However, Disney is still in the entertainment and content side, not the network side.

Fortunately, the busy, core parts of AT&T's and Comcast's businesses will keep them strong going forward. As time passes, and as the COVID-19 threat is mitigated over the next year, the companies' other businesses should start to rev up once again.

Let’s take a closer look.

AT&T has expanded its footprint in recent years by acquiring DirecTV and WarnerMedia, which includes CNN, Warner Brothers studios, Time Warner content and much more. Next, the company expanded into pay TV with AT&T TV and HBO Max.

WarnerMedia will release 2021 films on HBO Max and in theaters

In fact, AT&T announced last week that its new 2021 Warner Brothers films would be released at theaters and on HBO Max on the same day. This industry transformation should be exciting to see.

Many of us expected this kind of move even without COVID-19. Things are just moving forward at a faster pace now.

AT&T and Comcast are still the two leaders in the new pay TV space. Charter Spectrum and Altice come next.

Remember, there is a difference between cable TV and pay TV. Cable TV is yesterday. Pay TV is tomorrow.

Comcast Xfinity acquired NBC Universal several years ago. That means it expanded via NBC television networks as well as Universal movie studios, theme parks, content and more.

Both AT&T and Comcast were in the process of re-writing the rules going forward. Then suddenly coronavirus appeared and slowed the expansion plans temporarily.

Today, they both offer wireless, wire line, pay TV, Internet, news, entertainment, programming, movies and much more.

AT&T and Comcast are on both the services and content side of industry

AT&T and Comcast are the only two companies to date to live on both the services side and the content side.

These two companies look like they will be the key players moving forward in this new industry or sector they are both creating.

What impact did COVID-19 have so far? It hit earlier this year and threw everything at every company out of whack for a while. Some industries got busier. Some stayed the same and others have been hit hard.

AT&T, Verizon, T-Mobile stronger than ever on core services

Like other companies, AT&T and Comcast have strengths and weaknesses. Several parts of their business are in both camps.

Their wireless, wire line, pay TV, Internet and more are busier than ever.

Other parts like movie studios, theaters and amusement parks have been hit. Remember, this hit is only temporary.

Parts of Disney like Disneyland are hit hard with government restrictions

Disney is also in a similar boat. Disney is on the content and theme part side only. It is not the services side. It doesn't own movie theaters.

Parts of its business are busier than ever. Other parts like the movie studios and theme parks like Disneyland and Disney World have been hit hard by government restrictions due to the COVID-19 threat.

Streaming TV services: HBO Max, Peacock, Disney+, Apple TV+

One of the new areas is streaming TV services like HBO Max, Peacock, Disney+ and Apple TV+. These started earlier this year and it will be interesting to follow how they grow.

While these streaming services have benefited out of the gate from people staying at home, it will be interesting to see if COVID-19 has an ongoing important impact.

Subscribe to get our Daily Fix delivered to your inbox 5 days a week

The challenge here is getting customers to buy into this new way of thinking. Convincing users to purchase multiple packages of services so they can watch everything they want to. The challenge is getting customers to spend on things they never had to before.

We’ve seen the push and pull of this new streaming services in the marketplace recently.

Users pushed-back on Apple TV+ which owns Charlie Brown Thanksgiving and Charlie Brown Christmas. So, at least for this year, Apple has now decided to run these two shows free to viewers on PBS.

Like I mentioned earlier, Warner Brothers, owned by AT&T, will be releasing its entire 2021 list of new movies both on HBO Max and at theaters at the same time.

This is what I expected, before COVID-19 appeared. I also think this may start to catch on with some competitors as well.

Wireless, telecom, pay TV, Internet are changing

So, as you can see things are changing. Things have always been changing over decades. And while customers love some changes, they push back on others.

This new marketplace will continue to move forward. Companies must listen to the marketplace and tweak the path forward as we watch these companies and new segments grow.

Long-term, COVID-19 will fade, and many impacted businesses will get back to normal as quickly as they can. So far, business is getting back to semi-normal.

In fact, the Dow Jones closed above the 30,000 mark again setting another new record high last week, while the S&P 500, Nasdaq and Russell 2000 all set new highs on Tuesday.

I also believe core services like wireless, telecom, pay TV, Internet and more will continue as strong as ever both today and looking forward.

Verizon, T-Mobile, Charter Spectrum, Altice, Cox and others

Not all companies are taking the same path as AT&T, Comcast and Disney.

Consider Verizon, T-Mobile, Charter Spectrum, Altice and others. They have been growing, but the growth is only in their core services. They are not expanding into other areas as far or as quickly as AT&T and Comcast.

Plus, cable TV companies are expanding into wireless by reselling Verizon Wireless or T-Mobile via their Xfinity Mobile, Spectrum Mobile and Altice Mobile offerings.

I also expect Cox Mobile or Cox Wireless to enter as well.

So, as these industries continue to come together, we will look at them all differently going forward.

As we move forward, we must be careful to compare all these companies in different sectors.

Like I said earlier, we may see AT&T and Comcast in their own expanded group. At the same time, if we are just looking at wireless, for example, we'll need to examine how they're doing in that group.

And we may see other competitors in other groups like Verizon and T-Mobile on the wireless side, and Charter Spectrum, Altice and Cox on the pay TV side.

So, when you compare one company to the industry, you must be sure you understand the industry sector you are comparing.

Yes, things will be a bit confusing for a while as we continue to move forward.

Industry convergence will continue going forward

It will be interesting to watch how these massive industries continue to come together, becoming the new massive industries of the future. It’s been happening over the last decade or two, bit by bit, and I believe it will only continue.

Some companies will expand, and others will stick to their basics for now.

Remember, this change wave all started decades ago with local phone service, long-distance and cable TV. They were separate industries. Then they came together and then acquired wireless. Internet was next. Now pay TV is joining this group and streaming services for some.

What’s coming next? As you can see, the industry is continuing its long-term blending, transformation and expansion. Things keep changing.

Companies and services are continuing to come together. Some do a better job at this than others.

Industries which were totally separate yesterday, are all coming together today. And this will only continue into tomorrow.

So, let’s keep our eyes open to the changes as they occur with services, companies and industries.

One thing we know for sure, companies all have their own core services like wireless, telecom, pay TV and Internet, and they remain as strong as ever today.

At AT&T, Comcast and others in the space, these core services will continue to grow going forward on both the consumer side and the business and government side of the equation.

 

Jeff Kagan is an Equities News columnist. Kagan is a Wireless Analyst who follows Telecom, Pay TV, Cloud, AI, IoT, Tele Health, Healthcare, Automotive, Self-Driving cars and more. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan and LinkedIn www.linkedin.com/in/jeff-kagan/

_____

Equities Columnist: Jeff Kagan

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer. The author of this article, or a firm that employs the author, is a holder of the following securities mentioned in this article : None

Market Movers