Nearly One Quarter of Millennials Use Someone Else's Password to Access Pay TV Content, UBS Says (CHTR) (CMCSA) (NFLX)
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John Hodulik, the UBS analyst covering Pay TV, published a note this morning discussing how password sharing allows OTT consumers to access pay TV just not pay for it. A survey performed by the bank indicates that 24% of 18-35 year olds use other people's credentials to access content. Amid the masked demand the analyst remains very positive on Charter (NASDAQ: CHTR) and Comcast (NASDAQ: CMCSA) with Charter having the most upside.
As kids head off to college or just leave the nest, it is not just possible but probably that they continue to use their parent's login credentials. "In other words, they are continuing to consume pay TV content, but are not paying for it." This implies that the demand is there but the willingness or ability to pay is not.
Password sharing effectively makes these subscriptions friends and family plans, but with improving subscriber trends in cable, there is less urgency to deal with the issue.
The analyst believes that video losses for the public companies (cable/satellite/telco) will be roughly 200K or better in 3Q, improving from the ~300K lost in 1Q and the ~400K lost in 2Q. Most of this change is due to better cable fundamentals, as the MSOs focus on all-digital triple plays with higher speeds.
A proprietary survey showed that roughly 19% of those who watch Amazon (NASDAQ: AMZN), Hulu or Netflix (NASDAQ: NFLX) do so with someone else's credentials. The fraction was 24% among those aged 18-34.
Charter seems to have the most free cash flow upside as its financial metrics converge with industry norms in the coming years, following the TWC acquisition.
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