What is currently unfolding in the world of online connectivity presents a number of opportunities for income investors. The transition is blending Internet, phone and television into one. The transition is not something that will fully materialize within a year, but for the long-term investor, if you select the right companies, you could be sitting on very solid and large dividend payments for the foreseeable future.
In a recent Daily Mail article, online access was compared to smoking and drinking addictions. The comparison is interesting, but is slightly off base. The reason why taking away online access from people draws such a powerful responce is because it has become a medium in which they are able to conduct their day-to-day lives. You could also argue the use of electricity is very addicting and when taken away it produces very powerful reactions, too.
Being online is to many people is akin to having electricity services; it’s something that’s a requirement (though it’s not to the degree of electricity). This goes beyond a service like cable television. Cable television is about entertainment. Online access is about entertainment, communication and being productive (working).
Companies that are able to harness online connectivity and introduce Internet, television and phone service together will be in a very powerful position. To a degree, this convergance has already occured. Verizon, AT&T, Comcast and other operators have introduced Internet, TV, and phone packages. Yet, none of them have actually brought the 3 together.
What you will see in the future is a greater degree of integration between television and online content. The idea of a television channel is slowly transforming. As the line between channel and website blur you will see content presented as it is now on your television, but in a manner that is more digitally interactive and integrated.
For the past few years cable television providers have integrated on-demand services to their cable offering. This transition is part of the meshing of the online and standard television world, but it is not the end-all.
What we are experiencing now is a transition from telvisions being a stand-alone device to becoming a connected device. As a greater share of the population uses connected televisoions, comapines providing video content will have a greater variety of tools at their disposal to interact and engage with their viewers.
The entire transition depends on companies like Verizon, AT&T and Comcast to provide the necessary connectivity. The difficulty is foreseeing how this change is landscape will play out. Remember, the most radical shift here is in the cable television market. All major cable providers will need to position themselves properly for the new area in television content.
Cable revenues are a large income generator for the companies mentioned. If for some reason they are not able to main this income stream or have it taken away by a better suited competitor, then the future of their dividend payments and growth could come into question. For the companies that get it right, their investors will be rewarded.