Why Smart Investors Are Watching the Idiot Box

Today, let’s forget about the big picture stuff.

There’ll be no talk of plummeting interest rates.

No discussion of rising gold prices (though if you want to find out about a potentially spectacular gold investing opportunity, you should read this now).

And we won’t even mention the debacle that is Deutsche Bank…

Because sometimes it’s in the mundane activities of daily life that you actually find the best investment ideas.

No matter what’s happening in the economic corridors of power.

Let me explain…

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Who needs a TV these days?

My LG widescreen TV is on the blink.

For some reason, it takes ages to tune into the normal TV channels. At first, it only took five minutes of fits and hisses before broadcasting began.

Now it’s up to an hour.

It takes so long to boot up, the family joke is to ask if you’re keen to watch anything on TV tomorrow

In days gone by, this would’ve been a disaster.

I’d have been hot-footing it down to JB Hi-Fi or Harvey Norman faster than you could say ‘JB, you’ve done it again…’

But these days, it’s no big deal.

Netflix streaming still works fine on the actual monitor, my wife still has her iPhone, I’ve got my laptop and the kids can jump on to the iPad for their daily fix of Transformers.

In fact — shock, horror — we mightn’t even bother replacing the TV when it eventually bites the dust altogether.

Think about how monumental a change this is for a moment.

It certainly got me thinking…

Is there something bigger playing out here?

TV sales are starting to suffer

I’m old enough to have lived through a significant evolution in TV technology.

I remember watching Snooker in Scotland on the old black and white TV, complete with a metal coat hanger (acting as de facto aerial) sticking out the back!

Have you ever tried watching Snooker (a game which necessitates knowing what colour each ball is) on a black and white TV?

It’s probably a lot like watching those old AFL games back in the day when both teams had pretty much the same striped shirts on.

But I digress…

My point is, it was only a few decades ago that TV was your only window to the world. No matter how basic it was.

And we all watched the same news, the same shows, the same sports and the same soaps.

For advertisers, it was a dream.

A captive audience ready to sell to each and every day. And it’s no surprise that ad men came to dominate early TV.

In a piece by Emily Nussbaum a few years back in The New Yorker, she wrote:

‘…Lawrence R. Samuel describes early shows like NBC’s “Coke Time,” in which Eddie Fisher sipped the soda. On an episode of “I Love Lucy” called “The Diet,” Lucy and Desi smoked Philip Morris cigarettes. On “The Flintstones,” the sponsor Alka-Seltzer ruled that no character get a stomach ache…

But over time, things evolved.

The madmen lost their influence due to technology.

First came video, then cable, then DVDs and in modern times, internet downloads and streaming.

Today, we’ve got new hardware like smart phones and iPads.

And as you’ll see below, I’m not alone in my thinking. TV sales are starting to suffer:

Bar graph showing average TV per household
Source: Energy Information Administration

Two things jump out here.

One, the number of households in the US with three or more TVs is falling. And the number of households with no TV is growing.

Another notable trend is the change in viewing habits.

For example, the younger Millennial generation now watch more online video than traditional TV.

That’s a huge behavioural change from Generation X-ers like myself and my Baby Boomer parents.

The investing opportunity in the TV industry

Less TVs, more streaming, more choice, less advertiser control…there’s a whole lot of moving parts to this unfolding story…

Which is why it’s such an exciting place for you to look as an investor.

Change means opportunity.

It’s not just about falling flat screen TV sales and the growth of Netflix. They’re just the symptoms of a deeper trend.

Look further out and you’ll see a domino effect starting to take place.

You’ll find out how YouTube’s personalised search algorithm — a clever piece of coding that targets you with things to watch based on your previous viewing history — could be responsible for young people falling into the rabbit hole of extremist content.

Or even more worryingly — Jordan Peterson videos (I joke…!).

The world of advertising has had to change too.

We’re now in a world where influencers such as Kim Kardashian can charge up to US$500,000 to post a picture of herself on Instagram promoting a certain brand.

And when you think about it, it isn’t all that different from what ‘I Love Lucy’ was doing drinking coke 70 years ago.

As with all changes, there will be winners and losers.

Linius Technologies Ltd [ASX:LNU] and Roku Inc [NASDAQ:ROKU] in the US are two interesting innovators worth checking out.

Will traditional TV survive?

I suspect not…

Even Rupert Murdoch’s subscription model Foxtel is struggling.

They flagged recently that there could be job losses associated with falling profits. A sign that the changing TV landscape is starting to bite, perhaps?

These financial woes could have a knock-on effect to the money that Foxtel pump into sports such as the AFL and A-League soccer.

What will that mean?

Like I said, there’s a domino effect happening in the land of TV right now.

Your job is to work out what opportunities are worth tuning into, and which aren’t.

Good investing,

Ryan Dinse,
Editor, Money Morning

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Ryan Dinse is an Editor at Money Morning. He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle. Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.  


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