How to Play Coming the Internet/TV Revolution

January 07 2009 by Jason Byrne

So I had a few minutes here before I head out the door, and I started thinking more about the coming merger of TV and Internet that has been fabled for years but finally seems realistic.  I started thinking who stands to benefit from this?  How can a saavy investor play this?

I started thinking about Netflix, Adobe, Apple, Google, and Microsoft.  Depending on how things play out, what moves are made, who survives, who is acquired, and what brand wins out it could fall into any of their courts.  Or it could work out for a brand like Tivo, Slingbox, DISH, EchoStar, or DirecTV.  Or some other player could jump in there and do it better.  Like maybe Wal-Mart or Blockbuster (hah! don't see that happening).  You never know.

So what players will be absolutely necessary no matter what?  Content Delivery Networks!

There are two major publicly traded players in that market.  Akamai (AKAM) and the much smaller Limelight Networks (LLNW).   There are some other players that are up and comers and not publicy traded like BitGravity, Move Networks, and Fliqz.  They may make an impact.  And then there are some other companies that are trying to branch into this arena that I don't think will be successful like RackSpace (RAX) and Level 3.  I think another one to think about is Amazon.  They may start to creep in.

But as this revolution takes place there is going to be plenty of demand for this high quality bandwidth with regional distribution points that these large CDNs will be able to deliver.  There won't be just one winner.  Akamai has a pristine balance sheet and is profitable, even if trading at a high multiple.  Limelight is really a small cap at just 250M or so market cap, and they have a decent balance sheet even if not yet profitable.  Either of those are probably a great long term play on the future of internet and TV.  I wouldn't mind holding Amazon (AMZN) stock either.  They are doing great things with their cloud computing to balance out their retail end which is obviouslly still the biggest part of their business.

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Tags: Stocks, Internet, Video, Akamai, Limelight, Amazon, AKAM (Quote), LLNW (Quote), RAX (Quote), AMZN (Quote), CDN

Comments

  1. January 12 by
    Preston
    Amazon is definitely hot when it comes to internet tv. I'm surprised I didn't see any mention of Yahoo. They're pushing itv really hard and making moves to be set up for when it really takes over.
  2. January 13 by
    Jason
    I haven't seen any real moves by YHOO in this area. Maybe I missed it. Only in TV widgets, which isn't the same and I think will be little more successful than PC widgets (not). Amazon will get it together, but they;re not a real cdn yet.
  3. January 13 by
    Jason
    Was holding the baby... wanted to clarify real quick about Amazon. They have two dogs in this fight. They are a strong contender for the movies on demand business and have been making distribution partnership in that area, announced recently. Also they have their cloud computing initiative (S3 and the other acronyms), but at this point that isn't true CDN... although it's been inching more in that direction lately where you can pay extra to upgrade your S3 to distribute from multiple regional points. They are using Limelight though for their move distribution at this point from what I read... not their own product.
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