Vincent Shen: I'm curious now, who's your pick among the newcomers in pay TV?
We're looking away from traditional cable companies, things like that.
Who's your MVP?
Dan Kline: I mean, I feel weird saying this is a newcomer, but you can't argue with what Netflix is doing.
Whether you have cable or don't have cable, in the U.S., two-thirds of you with cable have Netflix.
It's kind of a stunning number of subscribers.
If you said today, "From scratch, I'm going to create a company that has the intellectual
property that Netflix now controls, and the amount of hit shows that they own outright,"
it's almost impossible. Netflix came together almost by accident.
It was a service that was basically just rebroadcasting other people's stuff that dabbled in originals
that had some hits and has gone to the tune of about $6 billion a year in creating this
massive firewall of originals.
Other than Disney, which obviously owns a ton of originals, and maybe Comcast,
there is nobody out there.
If you and I had $20 billion to start a streaming service, that wouldn't get us to half of what
Netflix has now. That's a very hard business to go after.
Shen: I think most Fools are familiar with the Netflix story.
There's one data point that I'll make here to emphasize what I think will shape up to
be a really nice tailwind for Netflix long-term.
There's this latest Piper Jaffray Taking Stock
with Teens survey. I think you've heard of this, Dan.
Kline: Yes.
Shen: They said that Netflix and YouTube accounted for 70% of the daily video
consumption among teenagers. 70%. There's an honorable mention for Alphabet's YouTube.
I know that service has started to offer an ad-free experience with the monthly subscription.
They also have their own YouTube TV bundle.
In the same survey, cable TV's share of daily consumption among teens stood at just 16%.
That's down from 30% just three years ago.
I bring that up because Dan, you and I have discussed this before, it's the very real
potential for younger consumers and TV subscribers to basically grow up never having access
to these traditional pay TV packages, meaning they'll never really miss it or have the desire
to sign up for it as they grow older, because there are all these other alternatives.
I do think there's something there.
Kline: Yeah. There's also a seismic shift of my generation.
I'm, I don't know, 18 years older than you, something like that.
We wanted a bigger television.
I went from the 13-inch black and white television to, now I have a 60-inch big wall television.
My son will happily watch "TV," YouTube or whatever, on his phone, in a room that has
a big television that has YouTube on it, if you wanted to be watching those things.
I think that's a seismic shift. You're right, you can't miss something you don't have.
That said, I do think as people get older and they get into relationships and they have kids,
cable TV starts to make more sense. I think that's the firewall for the industry.
You don't have kids yet, but if I want to watch the NFL, and my wife wants to watch
a Lifetime movie, and my son wants to watch Cartoon Network, I could probably buy all
those things in streaming packages, but it's easier to have cable.
I do think that's going to protect the industry. Young people also live in dorm rooms.
They're not used to having a big house yet.
At some point, most of them go out and get a decent-sized house.
I don't think this is the end of cable, as some have predicted.
Shen: Sure. With that, keep in mind, we've seen similar trends, though, where a new market will go
without something that the more developed markets think is necessary.
I think about, for example, how mobile phones are the primary computing device in a lot
of developing markets.
If you think about personal computers, they aren't taking as much of a hold, as much of
the market, in those regions.
It changes the equation entirely for how people are using their computers, how people are
using their mobile phones.
It's interesting to see how that will evolve for this younger generation now, where, for example,
they're watching it all on this six-inch screen on their phones.