As Verizon Communications Inc. (NYSE:VZ) sets a significant portion of its investment strategy on bringing broadcast capabilities to wireless, the landscape for cable has gotten even more challenging. Cable companies such as Comcast Corporation (NASDAQ:CMCSA) already have their hands full dealing with the very real threat posed by streaming video companies such as Netflix, Inc. (NASDAQ:NFLX) , but with this latest challenge, they are fighting a battle on multiple fronts. Verizon Communications Inc. (NYSE:VZ) CEO Lowell McAdam may be trying to convince the National Association of Broadcasters that his company means no harm, but his investment strategy in 4G LTE is designed to not only compete with cable, but kill it altogether. The scary thing for Comcast Corporation (NASDAQ:CMCSA) is the reality that killing cable is exactly what wireless is going to do.
The path of disruptive technologies
When a disruptive technology comes along with the power to alter the very landscape of consumer behavior, it is rarely a direct frontal attack. For example, discounters didn’t challenge traditional grocery stores by entering the market as alternatives. Rather, they began as places to buy staples — like paper towels and pretzels — in bulk. At first, the grocery chains didn’t notice or care — their valuable shelf space couldn’t be filled with 48-packs of toilet paper. Then the discounters offered a bit more, and again the major chains were ill-equipped and disinclined to compete. By the time one-stop super centers began offering full grocery options, the discounters already had a firm command of the market they were disrupting.
Verizon Communications Inc. (NYSE:VZ)’s investment strategy in 4G LTE for broadcasting to its customer base is likely to follow a similar path. It starts with McAdam saying, “We don’t want to get in the way of broadcasters,” with reference to the idea of broadcasting the 2014 Super Bowl. He explains further than his company could “add a dimension and it becomes better.” Maybe Comcast Corporation (NASDAQ:CMCSA) and others will ignore the offering as a fringe add-on and let Verizon Communications Inc. (NYSE:VZ) in the door. When football fans begin watching the Super Bowl on their smartphones, it may go unnoticed, but it could mark the beginning of the end for cable.
The importance of sports
It’s probably no coincidence that, in addition to focusing on an investment strategy that targets expanded 4G LTE, Verizon is starting with sports. Where services like Netflix and Amazon.com, Inc. (NASDAQ:AMZN) Prime target content that is less time sensitive, sporting events are the one thing people insist on watching in real time. Catching your favorite show after its original air date is less annoying than missing the big game. Amazon and Netflix are so busy fighting over content that the means of delivery is wide open for Verizon.
The importance of sports is one of the reasons that Comcast Corporation (NASDAQ:CMCSA), also the owner of NBC, continues to shift important sporting events to pay channels. If consumers want sports programming, and paying for it is the only way to watch the big game, it’s a good strategy. This means that sports represents the promised land of broadcasting — if Verizon Communications Inc. (NYSE:VZ) can push its way into sports, it will be well on its way to killing cable.