Sony: The Cable Replacement

pstv

SNE is rolling out its web TV service, Vue, across the US with a starting price of $30.

Broader availability, attractive pricing, robust content and rising hardware sales are all supportive of Vue’s long-term growth outlook.

Remain bullish on SNE.

Sony (NYSE:SNE) just made cord-cutting easier. PlayStation Vue, SNE’s web TV product, is now available across the US starting for as little as $30/month. Vue is a cable replacement in that it delivers numerous TV channels and on-demand content, and also allows the viewers to record shows on DVR and watch multiple TVs around the house in one account.

Given the current weakness with the basic cable subs trend that we witnessed last quarter, lower pricing, broader availability and strong PS4 sales momentum could potentially accelerate the cord cutting trend in the US.

Equally important, the recent FCC ruling on cable set-top box is a positive for SNE in that it could drive broader adoption of third-party set-tops. Given that the video game console is evolving to become a comprehensive media home entertainment device, I see SNE as one of the beneficiaries. I remain bullish on SNE.

When SNE introduced PS Vue a year ago, it was difficult to see why anyone would sign up for the product given its unattractive pricing and lack of content differentiation. However, the addition of Disney (NYSE:DIS) products was a game changer in that Vue now can offer live linear content from all of its Big Four networks, effectively addressing PS Vue’s earlier weakness in content offering. Despite the decline in viewership, ESPN remains the largest sports network in the US and continues to have the capability of attracting viewers given its live sports programming.

The nationwide rollout puts Vue in direct competition against other web-TV products such as DISH’s (NASDAQ:DISH) Sling TV, which cost $20/month ($25/month with sports add-on). Although Sling TV is cheaper and has broader device penetration (i.e. Roku, Fire TV, Chromecast, iPhones and iPads,Android phones and tablets, Android TV devices, Xbox One, and PC and Mac computers), Vue surpasses Sling TV in terms of content offering with ABC and Disney channels, which is why I am bullish on Vue’s growth outlook and on SNE.

On a final note, web TV services such as the Vue will no doubt result in higher data consumption among its subs. As these services get consumed over wireless, the higher data demand actually favors smaller wireless carriers such as T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) that have more spectrum than the incumbent AT&T and Verizon. Higher spectrum and lower spectrum cost advantage allow TMUS and S to be the preferred carriers to consume these media channels over mobile.

In conclusion, SNE is better positioned to capitalize on the cable unbundling trend that is shaping up in North America. When comparing against Sling TV, PS Vue is looking more like a competitive web TV package. Additionally, the rising popularity of the PlayStation 4 could drive meaningful penetration of PS Vue in the US, allowing SNE to take TV subs from the cable companies. That said, I remain bullish on SNE and cautious on traditional cable companies such as Time Warner (NYSE:TWC) and Comcast (NASDAQ:CMCSA). SNE remains one of my top picks amongst the Japanese tech stocks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Article originally posted on Seeking Alpha

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