Growing saturation in the U.S. pay-TV market and increased
competition from the low-cost online video streaming service
providers are forcing established pay-TV operators to restructure
their business models. A recent Reuter report stated that
), the largest satellite-TV operator in the U.S., has offered $1
billion to acquire Hulu, the online video streaming service
Hulu is currently jointly owned by
Walt Disney Co.
). However, Comcast has no management control over Hulu as it had
been restricted by the FCC after its acquisition of NBC
Universal. Reuter reported that seven firms have bid for Hulu.
Apart from DIRECTV, two other firms have also offered $1
The U.S. pay-TV market is extremely competitive. In addition
to the traditional Cable TV and satellite TV operators, telecom
giants are also offering fiber-based high-speed video services.
In contrast, low-cost online video streaming services have also
become very popular especially when the economy is still reeling
In order to survive in this juncture, traditional pay-TV
operators are diversifying in related fields. Comcast acquired
content developer NBC Universal and deployed several innovative
services such as X1, Streampix, and high-speed business services.
Time Warner Cable is concentrating on high-speed residential and
business services. DISH Network is desperately trying to deploy a
nationwide wireless network.
Similarly, we believe that DIRECTV also needs to restructure
its business model and the decision to bid for Hulu is one such
step. Hulu commands over 4 million subscribers and generates
revenues of about $700 million per annum through subscriptions
and a free ad-supported service. Hulu will enable DIRECTV to
offer low-cost online video in addition to the company's
expensive premium-brand pay-TV package.
In the U.S., DIRECTV had 20.105 million subscribers at the end
of the first quarter of 2013. Although the company is still
generating net new subscribers, the rate of growth has slowed
down. In the last quarter, it added just 21,000 subscribers
compared with 81,000 subscribers in the year-ago quarter.
DIRECTV also has a solid footing in the Latin American
markets. However, even there, competitive pressure is gradually
increasing due to high-speed 3G bundled services of voice, video
and data offered by the large telecom operators.
COMCAST CORP A (CMCSA): Free Stock Analysis
DISNEY WALT (DIS): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis
To read this article on Zacks.com click here.