“In the midst of chaos, there is also opportunity.”
2,500 years ago, Sun Tzu wrote the Art of War. Its unlikely modern military generals still prescribe to his practices, but there is one battlefield where his guidance is still headed: Wall Street.
Technology will continue to evolve, but the principles of war are timeless. The current battle between content providers and content distributors is no exception. This war isn’t over, and I believe a diligent investor can predict who’s going to come out on top. Here are two battles happening right now and how you can be on the winning side.
The argument comes down to re-transmission fees (the rights to re-transmit a signal back to customers). CBS Corporation (NYSE:CBS) is the number one prime-time network in America, and in an internal memo, argued that it is not in the top 10 of Time Warner Inc (NYSE:TWX)’s fee recipients. The second largest cable provider in America, Time Warner Inc (NYSE:TWX), fired back by saying that CBS Corporation (NYSE:CBS) is asking for a fee raise of 600%, a price increase that the rest of the market does not reflect.
While both sides have made their trenches and don’t appear to be moving, a deal must be struck before July 30th or else CBS Corporation (NYSE:CBS) may go dark to Time Warner Inc (NYSE:TWX) customers. If you’re worried about trying to get on the winning side of this battle, don’t be overly concerned. I believe both companies will be victorious.
Sun Tzu said it best when he wrote “There is no instance of a nation benefiting from prolonged warfare.” Each company stands to make money on the deal and the siege shouldn’t last long. The way each company’s stock has performed, investors can even profit on both fronts of this battle.
The companies release earnings soon and things should be looking up for both factions. CBS Corporation (NYSE:CBS)’s board has authorized a $6 billion dollar buyback program to increase shareholder value, and Time Warner Inc (NYSE:TWX) has reported strong earnings in 3 of the last 4 quarters.
Contents shifting alliance
Last month, the biggest names in content and streaming went head to head. Streaming giant Netflix, Inc. (NASDAQ:NFLX) opted to let its contract with Viacom expire. Household Netflix subscribers immediately voiced their concern as Viacom provided Netflix with content such as Dora the Explorer and SpongeBob for younger demographics.
In addition to Nick Jr., Viacom also owns big name brands like Comedy Central, MTV, and BET. This content provider is a whale, and rival Amazon recognized that they could be a key ally. The two companies signed a multi-year deal to bring over 4,000 TV shows to the Amazon Prime streaming service.
