About a year and a half ago I got cable TV for the first time in over a decade.
There was only one reason.
NBC Sports inked a deal to broadcast English Premier League soccer games and invested heavily in production to make the quality just as good as watching from a pub in Newcastle.
The problem was, that’s the only thing I wanted to watch.
So I was basically paying about $120 per month to watch one channel.
That’s a bit high and the monthly charges just got to me after awhile.
So when the season ended in May (KTBFFH), I started looking for an alternative.
It didn’t take long to find a cheaper alternative that’s actually better. And, more importantly, going through the whole process helped me realize one of the biggest and lucrative investment trends of the next three to five years.
The Next $1 Trillion Investment Wave
I became a “cord-cutter” and joined an estimated 8.4 million Americans who successfully quit cable TV.
The whole process was far easier than I ever expected.
I’m not a techy guy and it only a took about three hours set up. That includes an hour on the phone canceling cable (they don’t make it easy) and driving to buy the hardware to connect your TV to the Internet.
The main thing I realized now that I’m a few weeks into it is my data consumption has exploded. It’s gone from about ten GB a month to more than ten GB a week.
Internet video just takes so much more data than anything else.
For example, just one minute of HD viewing on Netflix takes the same amount of downloaded data as 166 books (est. 300 pages per book) from Amazon’s Kindle store.
That’s huge. But it’s just one minute of video.
Extrapolate the data consumption out out over time and the growing number of cord-cutters and you’ll see a major opportunity forming.
The average Netflix user watches about 90 minutes a day.
There are more than 61 million Netflix subscribers around the world.
That’s just Netflix. There are many other streaming services and products like Hulu, Roku, Apple TV, Amazon Prime/TV, and Google Chromecast, all of which have millions of users/subscribers).
The demand for data is creating a major bottleneck telecom companies are working fast (and spending big) to alleviate.
The chart below from research at Cisco shows exactly what’s happening to data consumption around the world:
The primary driver of all this is Internet video.
It’s driving data consumption parabolic and it’s going to take massive capital investments to meet this demand.
We’re talking trillions here.
Remember dial-up? You’ve probably happily forgotten about it by now. Only 3% of U.S. population still has it. Broadband has been the standard for years.
That transition didn’t happen quickly or cheaply though.
According the Broadband Association, the switch from dial-up to broadband cost an estimated $1.3 trillion spread out over the last 15 years.
That was a relatively small project compared to what’s going to be required in the years ahead.
After all, the U.S. consumed about 0.04 exabytes per month in 2000 when dial-up was the standard. Today they’re using 4.2 exabytes of data.
That’s an increase of 10,400% in 15 years. But it was only an increase of 4.16 total exabytes of per month.
In five years data consumption will grow another 20 exabytes per month.
That’s five times more data needed in one third the time and why we expect data network infrastructure to be a major trend in the years ahead.
Another “Inevitable” Growth Factor
Earlier this we talked about the opportunities presented by all the fallout from Greece and the fear still spreading throughout the markets.
We said we’d focus this week on opportunities which don’t need a major economic recovery and new highs in the bull market to pay off.
This fits that perfectly.
As the growth of Netflix, Youtube, Amazon, and others have proven, the data consumption explosion has almost nothing to do with the overall economy.
Data usage grew in 2008. It grew in 2014. It’s largely immune to the economy.
Next time we get together we’ll look at those specific companies and sectors leading the way in this $1 trillion+ investment wave.
And, as for my cord-cutting, so far it’s been an unqualified success. I watch less TV. Only stuff I really want to watch. There’s no channel surfing (a.k.a. killing time). And I save about $100 by not having a cable TV bill.