DirecTV (DTV): New Threat To Cable And Telecoms

DirecTV (NYSE: DTV) has hundreds of channels and can offer high-definition programming, but, because satellite signals do not work two-way, getting into the "on demand" business has been impossible. That has given an edge to cable firms like Comcast (NASDAQ: CMCSA) and telecom companies like Verizon (NYSE: VZ) with fiber-based TV.

The business landscape for "on demand" TV is about to change. DirecTV has a new product that downloads popular movies to a set-top box where they sit on the storage drive until a consumer wants to access them. Other films will be streamed to the box over broadband from DTV servers. It is an inelegant system, but it works.

According to The Wall Street Journal "More than just offering video on demand, this arrangement will let DirecTV tap what some analysts think could be a big growth area for TV providers — selling highly targeted ads."

"On demand" TV and the ability to target customers with marketing has belonged to the cable companies. Fiber-TV is very new and Verizon and AT&T (NYSE: T) are just getting their systems up. As these come online to challenge cable, stocks in the industry, especially Comcast, Time Warner Cable (NYSE: TWC), Cablevision (NYSE: CVC), and Charter (NASDAQ: CHTR), have taken a beating.

Now cable has not one "on demand" competitor, but two.

For cable shareholders, that is two too many.

Douglas A. McIntyre