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Wall Street firm: Netflix, Google to pressure cable

Credit Suisse says younger people turning to Netflix and dropping cable. Streaming Web video from Apple and Google also threaten cable companies.

Wall Street is bullish on Netflix, Apple, and the upcoming Google TV. The cable companies may get the horns. Pictured is Wall Street's Charging Bull sculpture.
Greg Sandoval/CNET

commentary To wannabe cord cutters out there: the cable industry says you don't exist, but count some Wall Street analysts as believers.

Reuters reported yesterday that top media and cable company stocks dipped after Credit Suisse downgraded shares of Disney, Viacom, News Corp., and Time Warner.

Credit Suisse anticipates that more young Americans will elect to drop their cable TV provider and replace it with one of the services that delivers video over the Web, such as Netflix, Apple TV, and the upcoming Google TV. That will prompt the cable companies to reduce their fees to TV networks and Hollywood studios.

At the same time, Credit Suisse analysts raised their price targets for Netflix shares from $90 to $140.

Credit Suisse's moves yesterday were due to survey results conducted by the financial services company. Almost 30 percent of Netflix subscribers between the ages of 25 and 34 now watch Netflix instead of cable or satellite, Credit Suisse reported. Nearly a third of the service's users between 18 and 24-years old have dumped pay TV in favor of Netflix.

"Netflix's low cost, subscription streaming service is our biggest worry and could become 'good enough' for consumers with moderate income," wrote the Credit Suisse analysts.

Only a modest percentage of Netflix's overall users (17 percent) have dropped their cable service, Credit Suisse found. Still the rising number of young cord cutters indicates that the future may be bleak for cable companies and pay TV providers, such as Comcast, Time Warner, and HBO.

All this means is that like other many other industries--newspapers, music, banking, travel, film, and advertising--the cable sector, at least as an entertainment provider, is now under threat of being elbowed out of the way by tech firms.

Here's a a suggestion: Maybe the cable guys should provide their customers with more value and stop denying that subscribers are sick of paying big fees for scores of channels they don't care about. The time is now for a la carte channels. Cable companies might also reconsider the extra fees for "premium" content.

I haven't paid for cable in a year. Last night my girlfriend and I watched two hours worth of NBC Universal's "30 Rock" on Hulu. We also have a Netflix account. CEO Reed Hastings is spending big to boost the selection for Netflix's "Watch Instantly" streaming video service. The service has seized the video-rental market away from Blockbuster. Sometimes, I'll buy a DVD if I find one deeply discounted at Best Buy or Duane Reade (I like owning good movies).

For sports events, I'll stroll down to the local bar, and I get my news from the Web. Voila.

I like to think of myself as a good saver so I want value. Cable TV no longer offers enough. In these tough economic times, I meet lots of people who feel the same way.

Credit Suisse confirmed what plenty of us have known for awhile: there is now an attractive alternative to cable: Hulu, iTunes, YouTube, and Netflix.