Motley Fool Hidden Gems Investing - Comcast vs. Disney

Episode Date: June 15, 2018

AT&T completes its acquisition of Time Warner. Comcast increases its offer for 21st Century Fox’s assets, setting the stage for a battle with Disney. Etsy shares soar on a hike in fees. And IHOP flips pancakes for burgers. Jason Moser, Jeff Fischer and Aaron Bush tackle those stories and take stock in the future of video games. Plus, Motley Fool media and entertainment analyst Tim Beyers weighs in on the future of Apple, Disney, Netflix, and YouTube. Thanks to Blooom for supporting Motley Fool Money.  Get a month free with www.blooom401k.com/fooland use the promo code “Fool”.  Thanks also to Casper! Save $50 on a mattress at http://www.casper.com/fool and use the promo code “Fool”. Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money Radio Show. I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Jeff Fischer, and Aaron Bush. Good to see you, as always, gentlemen. Good to see you. We've got the latest headlines from Wall Street. We're going to dig into the entertainment industry with our guest, Tim Byers. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the deal of the week. At long last, a federal judge has given the green light to AT&T's $85 billion bid to buy Time Warner. There are a lot of ripple effects to this. But, Jeff, you and I were working here at The Motley Fool back in 2000 when AOL bought Time Warner.

You tell me, is this merger going to go better than that one did? That's the big question. The odds are it will go better than the AOL-Time Warner merger, which was far premature and just went down in flames, as we all know. What AT&T is obviously trying to do is, it's got a fiber and mainly wireless and satellite network. It now wants to deliver its own content over that network to compete with the likes of Netflix and with Disney's upcoming streaming service as well. And Time Warner, same thing. Almost all of Time Warner's content, which is HBO, Warner Brothers, and Turner, so a lot of brands that we all know, it's all delivered through affiliates. They don't control how and where it's delivered

in most cases. So, to compete in the age of streaming, you have to merge these two businesses together. Will it work? I don't know. There are 12 board members on AT&T's board, and they have 746 years of experience among them, which is great. That's a lot of years. The average age is 62, though. So, are they seeing where things are going correctly? I don't know. TV continues to suffer. TV viewing traffic is down an estimated 8% year over year right now in the past week. But much bigger than that, Chris, are children's cable networks, where for going on six, seven months in a row now, viewership is down 20% to 29% year over year. Children are just not watching cable, and so you need to solve that with streaming.

Yeah, I'm a bit skeptical that this is going to turn into, you know, 20 years from now, that we're looking back at this being some amazing deal that went through. but I do think it is important because it marks the beginning, probably, of a series of mega-mergers that will reshape who owns the content that we watch and who owns the mechanisms through which we consume this content. If you're like me, I just wanted to even get a grasp of, okay, these are two giant companies, what does this even look like? It's essentially going to be four main business units. It's going to be the AT&T Communications, which is all the fiber, broadband, mobile, that type of thing. Their media business, which

will be new for them. Their international business, which is going to be ramped up from this. So, this is also a bit of a global play, a little bit, I think. And then, an enhanced advertising and analytics business. So, it'll be interesting to see how they think about this in terms of advertising, too, I think. Yeah, and you're right, Aaron, about mega-mergers, this makes it easier, or it could, for T-Mobile U.S. and Sprint to merge and deals with CBS and Viacom. Of course, there's 21st Century Fox and Disney trying to get together, and Comcast bidding for Fox as well. Even Express Scripts and Aetna could be green-lighted now. But I agree with you, I don't think this is the deal that makes

AT&T's future bright. It's interesting, Jason, because last week on the show, we talked about the letter from Warren Buffett and Jamie Dimon, and they're urging public companies to scale back on the short-term outlook. And Steve Case, who was the head of AOL and was the head of that merger back in 2000 with Time Warner, he was on TV this week basically saying, when I think back on what went wrong, one of the big problems was we were too focused on the short-term. And it seems like if this does work out for AT&T, it's because they're going to have to be patient about it. I mean, there's no question. I mean, it's one thing to go in there and make

deals like these because you have some grand aspirations. But deals like these come with a lot of just baggage. You've got to figure out how to sort through all this. And you have to have really a singular vision of what you want this to be and make sure that you have a team on board that sees that vision with you. And so, it really does all boil down to leadership. So, when I think about something like this AT&T deal, I see a lot of reasons for it to go wrong. Jeff was talking about T-Mobile and Sprint. That's a deal where I think that deal is going to get approved. And furthermore, I think that's going to be a really successful outcome because of John Ledger and just his success at T-Mobile, his consumer-centric nature. And really, he

has sort of laid out a vision, more or less, of what he wants this company to be. I think it would be a very hard case to prove that it wouldn't benefit consumers consolidating those three and four players in the space in giving us, really, one more competitive solution to the AT&T and Verizon duopoly that exists today. Right. And here's an interesting dichotomy, I think, is these giants, these new media giants that own the pipelines and content, are so weighed down with debt, they're not very agile. And the target audience, which is mainly younger people, is moving and changing habits and whatnot. Will they meet them where they are? And will that debt become a burden

to doing that. Netflix, for example, by contrast, has menial debt, not much debt yet. And yet, they don't own the pipeline. So, I would be worried, as bullish as The Motley Fool has been on Netflix for a long time now, we still have to worry about them not having control to the access line to the consumer, aside from streaming through someone else's pipes. Well, you mentioned the bid for 21st Century Fox's assets. And let's go to that, because there was news this week, Jason, and this is something we were expecting. It's nice to see that it actually came to fruition. And that is Comcast, coming in with a bid of $65 billion in cash. This is about 20% higher than the $52 billion that Disney had

offered in cash and stock. Where do you think this is going? I think it's going to a bidding war, ultimately. I think at least the rumors are that Disney is working on a package to outbid Comcast, I guess, again, there, and sort of looking for a deal here. I think all of this, really, the going sentiment for this acquisition is that it's all in the name of Netflix and competing with Netflix. I mean, I think that's it to a degree. Certainly, Netflix is the company that has changed the space, so to speak, and taken us into this over-the-top and personalized and on-demand world. They're not the only ones that can do it. I think this deal becomes far more interesting now that net

neutrality has been overturned, because why would Disney worry about even getting caught up in a bidding war with this? And I think it's because their perspective is, and they have some experience to go on here, that the IP is worth more than the pipes. I think it's reasonable to assume that somewhere down the road with a new administration, net neutrality kind of goes back to where it was before, I could see that being re-implemented. If that is the case, those pipes become a little bit less valuable. But that IP is going to be very valuable for a very long period of time. So, I could see Disney putting up another offer here. They have the balance sheet to do it. They have a better balance sheet than Comcast. Both companies are about the same size.

I think they could go in there and use stock as a currency if they want to. So, I suspect we'll see some more back and forth with this. Yeah, it's interesting to me in the different ways that Disney and Comcast would approach Fox. So, Disney, on one hand, it would be much more of a horizontal integration in terms of it's just buying more of what it already does, like more content, more channels, greater access to more people. When Comcast is pursuing more of a vertical integration, more similar to the AT&T-Time Warner deal, which is very different in terms of the type of value that you would take out of the business. What I fear, though, is that, personally, I hope that Disney is the one that does get access to Fox, but I

fear that this is also just Comcast pushing up the price so that Disney might have to pay even more for those assets, which just makes it like a lose for whoever buys it. It's distinctly possible. I mean, you also have to at least consider, I mean, money talks right at the end of the day, but you sort of wonder, I mean, the Murdoch family, would they rather be a part of the Disney family or part of the Comcast family, even if they have to concede a little bit on the dollar front. When we look at the feelings that these two companies elicit, they're on polar ends of the Earth. Comcast just brings out the worst in everybody. Disney just seems to bring out the best. There's the warm fuzzy of Disney,

then the Twitter trolls of Comcast. I feel like they probably want to be a part of that Disney family, so I don't know how much that weighs into it. You know who doesn't have a warm, fuzzy feeling for Disney? Brian Roberts at Comcast. Because they tried to buy Disney back in 2004. That failed. A few years ago, they were trying to buy Time Warner Cable, and Disney was part of the group that helped to block that. They may be trying to drive up the price, or they may be saying, no, no, no, we're going to win this time. This is just a grudge?

A grudge with a business purpose. E3, the Electronic Entertainment Expo, which is hard to say, which is why they probably call it E3. E3 wrapped up this week in Los Angeles. This is the premiere trade event in the video game industry. Video game stocks as a group have done well for investors over the last few years, Aaron. Very well. You like this industry. What's your headline for this event? It's always fun to see all the games being showcased, all the publishers laying out their pipeline for what's to come. But what's actually most interesting to me is figuring out where the industry as a whole

is going, and throughout all the different things that these companies say, you can start to piece together some common threads. So, just three main highlights for me. The first one is just mobile, and this isn't anything new. And showcasing mobile at E3 is always awkward, because it's a very hardcore gamer environment. But the fact that they're doing it more and more just means that they're trying to get access to more gamers, because people are playing more games in more ways. They're trying to extend the franchises that they already have. And we're moving towards a trend of being able to play the same game wherever you are. And that's kind of game changing. That leads me to my second point, which is that the future is

streaming. There was a little bit of chatter at E3 about the next wave of gaming consoles. But even then, there was a little bit of chatter about what comes after that. And it's starting to seem more and more likely that the next gaming console might actually be the last wave of gaming consoles. and the shift of people powering these games in their homes on these big machines to companies with servers powering these games and just streaming it to people on whatever device they are. That's game-changing, and it also lends itself much more to a subscription strategy, which just changes the economics of the entire industry.

So that's a big deal. And then lastly, I would just say, more than any other time before, there were many personalities in terms of people at E3. And so, this is pro players, this is influencers, celebrities. And what that signals to me is that gaming is turning more mainstream than ever before. And the implications of that, who else becomes attracted to games? What else these gaming brands can do in new mediums? I just see this industry turning much more profitable and more mainstream. And I think that's really exciting. The hardware aside, one of the things we've talked about in this industry is that,

kind of like the movie industry, it is dependent on the hits. Did you see anything this week that sort of changed that thesis? That, no, at the end of the day, however these games are delivered, they still have to be great games. It's definitely both. You have to win people over at the beginning, and then there's an ongoing element of more content. And so, if you actually look, even beyond E3, just the top gaming companies, already, many of them, half of their revenues come from these recurring purchases or this additional add-on digital content. So, we're already there, but we still have a long way to go. Aaron, this wasn't premeditated, so I'll just put you on the spot here.

Sure. Coming away from E3, your favorite gaming company, which I think you have well in your mind already, and a company to watch, perhaps. Sure. So, in terms of what we actually can invest in, I think Microsoft is almost a dark course. And I say that in the sense that they don't, they haven't been super strong in terms of this console generation, in terms of their own exclusive games and such, but they're definitely laying the seeds to win over the next generation. And if this world turns much more streaming heavy, Microsoft has Azure. So they already have the infrastructure in place to make that experience

better than what other companies could do. The weather forecast for our next segment, cloudy with a chance of pancakes. Stay right here. This is Motley Fool Money. Thanks again to Bloom for supporting this week's Motley Fool Money. Do you have a 401k? Do you remember how frustrating it was deciding what to invest in without professional help? Well, now there's a better way to grow your 401k. Bloom. That's Bloom with three O's. Bloom is a simple, smart, and affordable way to grow your 401k. Go online to bloom401k.com slash fool and simply connect your existing 401k in just a few easy steps and then sit back and relax while Bloom performs an unbiased analysis of the funds in your account

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Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Jeff Fischer, and Aaron Bush. Dropbox, the cloud storage company, went public back in March. On Thursday, shares of Dropbox rose 20% on very high trading volume. And Jason, there was no news of any kind. What is going on here? That's correct. It doesn't appear, at least, there was any news regarding this. Trading volume through the roof on Thursday and Friday, it's very difficult to pinpoint exactly what the cause of this is. And I think that's where investors need to take a step back here and think, alright, do the business fundamentals beget this kind of move?

And it's hard to say that they do. This seems to be something inexplicable, almost. That's where investors need to be very careful, because it can be very tempting to want to jump on the bandwagon when stocks start going through the roof like this. There's a lot of interest, obviously, in these new IPOs. Dropbox is a fairly new company to public markets. I think it's a fascinating business from a number of perspectives. I think a lot of us know it as consumers, that free little Dropbox app that we've been able to use. To me, this is not a business that I'd have any interest in investing in yet, at least. I think with the most recent quarter, they've showed they're doing some good things. Paying users totaled

$11.5 million vs. $9.3 million a year ago. That's a big metric for them. I think they have a big opportunity to grow that paying user base in the enterprise side. But we are in a market environment today. We've been talking about this for about three years now. It just seems like the valuations are through the roof, and Dropbox is no exception. So, perhaps you want to get it on your watch list, but be very careful buying into companies that aren't making any profits yet. Yeah, so many interesting IPOs recently, and by recently I mean the last three years, and so many of them are in cloud and storage and cloud software mainly.

I'm more drawn to cloud software than I am to storage, and in a sense Dropbox will meld and be some of both. But I agree with you, Jason, you have to be careful, try to choose the companies that have competitive advantages that can sustain. I don't know where storage is going to go price-wise. I would think, down over time. The cost of storage should go lower and lower. It's more or less a commodity. That said, what we could all be doing, perhaps, is underestimating the size of the storage market. It could be much larger than estimated.

Shares of Etsy up 35% this week after the online retailer raised guidance for the fiscal year. Etsy plans to increase the transaction fee that it charges the sellers on its platform. Do they have that kind of pricing power? It seems like it. So, they're raising the transaction fee from 3.5% to 5%, and they're also going to initiate a 5% fee on shipping costs. And that might not sound like a lot, but just say I have a $100 item with $5 shipping. Before, that would have cost $3.50 in fees. Now, that would cost $5.25. So, that's actually a 50% increase in the fees that it would cause the seller. And that's pretty substantial. So, it is no surprise that the company is raising

guidance, with their revenue growth being forecasted from mid-20s% growth to mid-30s% growth. So, it's a meaningful change. Some might view this as a risk, because it could infuriate sellers and they might want to move elsewhere. But to me, this is a sign of pricing power in that they have solidified a brand and a lead in this niche part of e-commerce, and they have a pretty dominant two-sided network effect there. But lastly, I'll just say, this isn't the first controversial move the new CEO has made in this space. Last year, when he first came in, he laid off 15% of employees. So, this is another step, Justin, him reorienting Etsy to be more of a business-first culture. And so far, in a short amount of time, he's unlocked a decent amount of

value. It's interesting, because it's kind of the opposite approach of Amazon, where Amazon will charge its marketplace sellers more money, but you don't necessarily see it come through to the customer. In this case, I would think a lot of these Etsy sellers would push these price increases through, because they're significant. Dine Brands Global is the parent company of Applebee's and the International House of Pancakes. Shares of Dine Brands Global up 15% this week after IHOP changed its name to IHOB, the B standing for burgers. Let's go to our man behind the glass, Steve Broido. Steve, is this going to get you into an IHOP? I don't think so. At first, I thought this was a joke,

Now this seems like they're kind of serious about this strategy. Well, who here at the table really thought that B was breakfast? I mean, I thought it was going to be breakfast. Or bacon. Or perhaps burritos. Let's just go really far out there. I mean, burgers just seems to be, I mean, there's no competitive advantage in burgers. Stock's up 15%.

We'll see how this plays out. It's only up 7% annualized the last 15 years, though. Touche. All right, guys, we'll see you later in the show. Up next, we'll talk entertainment with analyst Tim Byers. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money.

I'm Chris Hill. On the line is Tim Byers. He analyzes the media and entertainment industries for The Motley Fool, and he joins me now from Colorado. Tim, thanks for being here. Hey, good to be here, Chris. Good to talk to you again. The last time you were on the show, it was October of 2016,

And the big story that week was that AT&T announced a bid to buy Time Warner for $85 billion. And I don't know if you remember, Tim, but one of the things we talked about at the time was, of course, this is going to get approved. Of course, this is a no-brainer. And here we are nearly two years later, and the deal is finally approved. How did you celebrate? How did I celebrate? I think I just took a drink of water and said, finally. But yeah, it is. It's crazy that it took this long or maybe not so crazy because, you know, the concentration of media assets. But

I do think this deal makes sense. And what's interesting to me, Chris, is that even with it being approved, Time Warner, the last I checked, was still trading for under one hundred dollars a share. So that means there's still an arbitrage opportunity in Time Warner stock. I mean, this should close right around 106, 107. I mean, if it's fully valued, that's, that's where you'll get to, you'll cash out around that price. But, uh, you know, the market still doesn't believe it. Like we're celebrating, but we don't believe it. Well, there's that. And also, and you and I talked about this before, there is still the specter, even though it was nearly 20 years ago, there is still the specter of the AOL Time Warner deal back in 2000. And how that was in some ways,

the beginning of the end for AOL. So maybe there are people who think this isn't a slam dunk just yet. And maybe there are people who just say, you know what? I saw this movie once before. I don't need to see the sequel. Yeah. And you know what? That is fair because AT&T is going to be consolidating a lot of things. And as we know, consolidation doesn't make you better. All it means is you've got more stuff. And then you have to lose some of that stuff to make sure that you know you can you can actually make profits out of that stuff but you know more things you know is is not necessarily good in in business in this or in the stock market so a big at&t i mean we've had a big at&t before and then it got broken up so i you know it's hard to say but i think if

you're a time warner shareholder hold on don't don't go anywhere this you're probably going to get cashed out you'll get cashed out at a good price and then you can redeploy the capital elsewhere. There's really no reason to not do anything other than that at this point. So one of the things that has happened, just as a ripple effect of this deal getting approval from a federal judge, is it seems like it is opening the floodgates for more mergers coming down the line. And first in line is the bid for the Fox assets, which Disney has made their bid. And Comcast, which was reportedly getting ready to bid somewhere in the neighborhood of $60 billion, came out this week, very soon after the ruling, with a bid of $65 billion, all in cash.

First, were you surprised that they went that high? No, I'm not. And I blame George Lucas for that. I really don't blame the government for that. This is entirely at the feet of George Lucas, because he made a deal in 1976 six to get Star Wars made, to give Fox rights to the original Star Wars, Star Wars, A New Hope in perpetuity, which means even though Disney owns that Star Wars franchise, they do not own, they're still paying Fox. I mean, talk about, you know, just adding insult to injury, salt in the wound. You know, you spend all this money to buy Lucasfilm and you get these these assets, these very precious assets, and then you still got to pay Fox. So I think it's not a surprise

that Comcast wants that jewel in the crown. It's also not a surprise that Comcast wants to get its own economies to scale. So no, I'm not surprised by that price at all. So you and I are taping this on Thursday. Disney, are they going to respond? Are they going to up their bid? Because I mean, there are some who say, you know what, just go ahead and let it go. I wouldn't. And I don't think Bob Iger will. I mean, he's a very conservative guy. I don't expect him to make an outlandish bid, but I don't think $70 billion is entirely outlandish when you look at the synergy between these two. First, if they buy the Fox assets, it's not just the TV channels they're building. They complete the Marvel Universe if they do that. They get the entire

rest of it uh they complete the star wars family it's like the collector's edition right you know you gotta get that last piece and so fox is the last piece for disney so i do expect them to respond in that sense and i i don't think 70 billion is too far afield considering the franchises that they're trying to build you went with a much nicer analogy i was thinking about it more along the lines of bob eiger collecting infinity stones and then if he gets it then he rules the universe yeah well and and it's kind of like that too but you know call it what you will but they do need to complete the set here and and there are multiple pieces that disney needs that fox has and so you know i mean they'd get deadpool they'd get the the rest of the x franchise they'd get you know

they'd complete the star wars franchise plus you know it gives them um you know some some coverage in sports i mean fox sports is a pretty actually that's going to stay with fox but you know there are some pieces that Disney needs. And I think they'll respond to it. I don't think they can let this go to Comcast. Before we get to the competitive landscape and what it may look like a year from now, I wanted to ask you about one other Disney-related story that came out this year. Because Disney also announced that John Lasseter is leaving the company. And for those who are unfamiliar with that name, John Lasseter was the chief creative officer for Walt Disney animation studios and Pixar. And I don't think it is a stretch to say that for a long time,

John Lasseter was, without question, the most powerful person in the animation industry. And he's been on sabbatical, and he's leaving at the end of the year following a sexual harassment scandal. And despite his history at the company and all of his success, This kind of seems like it was an easy decision for Bob Iger. And I'm wondering if you think in any way the animation side of the business suffers because it kind of seems like they've got a pretty strong bench in terms of talent and leadership. I think they do. And not only that, it's, you know, John Lasseter is most often and rightfully so identified with Pixar. I mean, that's his roots.

He is the guy that brought Toy Story to life in many ways. You know, there is no Pixar without John Lasseter. But there is a Walt Disney Animation Studios without John Lasseter. I mean, I do think that is, you know, you're right. He was the chief creative officer for Walt Disney Animation Studios. And I think that's an honorific in some ways. I think he had a hand in it. But I don't think that without John Lasseter, Frozen doesn't get made. I think Frozen does get made. I think Zootopia gets made. You know, I think these these very big films and frankly, a lot of the big animated films coming out of Disney lately are coming from Walt Disney Animation Studios, not from Pixar. Now, that's not to say that, you know, they haven't had some big ones. Coco has been a big one so far for Pixar. The Incredibles 2 could be a very big one. I mean, on inflation adjusted, the original Incredibles would be a $400 million film today. So it's not outlandish at all to think the sequel gets a billion dollars worldwide.

So Pixar is still a big brand. I just don't think John Lasseter of the John Lasseter of 2000 and the John Lasseter of 2018 have a very different influence. So I think you're right, Chris. Bob Iger had a pretty easy decision. Netflix is a bigger company by market cap than Disney. Does that does that give you pause at all? Little bit, but not a lot. And the reason is because when you think about it, there's two ways to see Netflix. You could see them as the streaming guys and the dominant streaming provider, in which case you would be like, that's crazy that they're bigger than Disney. Then there's the other way to look at them, which is the only media company in the world that has customers and direct relationships with customers with 190 countries in the world. And nobody else has that, not even Disney. And when you think about them that way, then it's a little bit of an outlandish premium, but not a lot of an outlandish premium because their advantage is global.

I mean, they have literally changed how we think of doing media distribution, and they've done it several times. They started with DVD by mail. Then they helped create the streaming business. And then they said, you know what, we can go global and have direct. We don't have to string together distributors, local distributors in every country and have them translate our content and do that. What we'll do is we'll get customers in every area of the world, and then we'll fund creators in each of those countries to create localized content, and we'll just own the whole thing. That is a new model, and it's a very powerful model, and it's really just getting started. So, yeah, it is a premium. It's a little bit ridiculous, but probably not as ridiculous as everybody thinks it is. But do they need, because despite all the things that they have, they don't have that last mile. No, they don't.

They still need a Comcast or an AT&T or Verizon. They still need someone to provide the pipes. And I'm wondering if you think they need either a partnership or even, God forbid, an acquisition. uh maybe but you know i mean netflix foresaw this about 10 years ago when um you know they built their own akamai and for those who don't know what akamai is akamai is the creator of what's called a content distribution network it's like an internet on top of the internet so you know you put content close to where it needs to be so it gets to where it needs to be really fast irrespective of how clogged the pipes are. So Netflix kind of defended itself against this.

Now, they are what you're alluding to, Chris, is that there's a net neutrality problem here in the U.S. and there could be worldwide. And frankly, the Internet isn't the same worldwide anyway. So, you know, how do they make sure that they're distributing at a high quality in every country in the world? Yeah, they could do that with some acquisitions, but they've kind of built this. He at least tested this concept here in the U.S. of controlling where they're going to put the content when they know they have to deliver it. And that model works really well. Right before I walked in the studio, Bloomberg had a story that Apple is close to making a deal for an animated feature film. Is this the beginning of the end for everybody else?

no but you know apple's in a really interesting place i i said this to you off air there's a difference when you switch from being the innovator to being the operator and um tim cook is an operator and he's a brilliant operator and i would argue this is um uh you know a i'll i'll go on record with this because i know it's a controversial statement and say that i think tim cook is a better CEO than Steve Jobs. And not because he's a better innovator, but because of where Apple's at right now. He is the perfect guy for that. And he's shepherding every asset the way it's supposed to be shepherded. So, yeah, does Apple come out with an animated film? Of course they do. They have the cash to do it. And they have an ecosystem. Apple has a way of starting at the

hardware and building out an ecosystem so you start with an iphone and then you have you know um i you know the rest of that itunes ecosystem that feeds that and in the case of they've had apple tv for years and they've never really built that ecosystem they're only just starting to do that so it makes a lot of sense that apple would do this it's not the end for everybody else But I think the problem is that in the era of short attention span theater and too much content, some stuff, a lot more stuff is going to lose than win. And, you know, Apple really doesn't care about that. So they can and because they all they really want to do is sell Apple TVs and iPhones. So I think it's fine.

It's not the end for everybody else. But for the smaller players, they are going to get squeezed for sure. For Apple, Netflix, Disney, Comcast, where is YouTube in all this? Man, that's a great question because YouTube is another pioneer in the wild card. They have trained an entire generation of kids and even young adults, really millennials, in fact, I'd say, to prize clips and, you know, shorter content and to watch, you know, in an hour, five or six different things. All those other players you just mentioned are making longer form content and they're not really creating for the generation coming up. That is really, really interesting. But YouTube is. YouTube is built from the ground up specifically for that. And they have subscription services now. They're on essentially every device you can get your hands on. And a lot of content now is consumed on the go and YouTube has the brand to deliver that, not just the device, you know, not just the apps on the devices, but people do expect that I'm going to consume YouTube on a phone or on a tablet and not always in front of a TV where it's kind of assumed that I'm going to consume Netflix maybe on a phone, but more likely, you know, I'm going to Netflix and chill, you know, right? Get a Netflix and chill in the living room or wherever.

But it's a different model. And I think for the generation that's coming up, YouTube is ideally suited to that, and they've got a lot of money to spend. They are buying original content. So I would say of all of those, YouTube is the one that's most likely to disrupt the traditional cable providers. with the single caveat of unless they become a primary licensor to those like a Comcast or an AT&T and you have very distinct YouTube fed channels and YouTube gets paid for it. I think Google would be very open to that because they have the advertising model. That could be a nice synergistic partnership that takes on a Netflix or an Apple. But we'll see. Either way, I think

And YouTube is one of the power brokers in this industry to look at for the next five years. Tim Byers covers media and entertainment for The Motley Fool, which means it's been a busy week for him. So I'm going to let him get back to work. Tim, thanks for being here. Thanks a lot, Chris. I appreciate it. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. This is Motley Fool Money. All right. Quick shout out to Casper.

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Terms and conditions apply. That's $50 towards select mattresses by visiting casper.com slash fool and use the promo code fool at checkout. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio once again with Jason Moser, Jeff Fischer, and Aaron Bush. Our man, Steve Broido, is on the other side of the glass. Also on the other side of the glass this week, special guests Kate Farmer and Jack Devlin sitting in for this week's Motley Fool Money. Thanks

so much for hanging out with us. Alright, let's get to the stocks on our radar. Steve, we'll hit you with a question. Jeff Fischer, what are you looking at this week? Sure. Speaking of cloud software, Appfolio, ticker is APPF, is another semi-recent IPO, market value of only $2.2 billion, annualized sales of about $160 million. So, it's a small company, but it's profitable, and it's been profitable for a long time. So, that's in its DNA, which I like a lot. Appfolio provides cloud-based software to the real estate market and the legal market. So, two very large markets that it's growing into. And then it plans to offer more markets beyond that. So, it has a good long-term outlook.

Steve, question about Appfolio? When do you get to not call yourself a cloud-based company? You know, that's the funny thing. Almost every software company is going to be cloud-based in the end. So, when we drop that moniker, it may be pretty soon. Jason Moser, what are you looking at this week? Well, Chris, you know I like baskets, so I'm going in a little bit of a different direction here in talking about the healthcare and wealth care basket, Chris. It's four companies in the healthcare space. United Health Group, ticker UNH, big dog insure, Massimo, ticker MASI, and Pulse Oximetry, Idex Labs, IDXX,

because, hey, pets are people, too. And also, Teladoc, you may have heard of it, Chris, ticker TDOC. This basket of stocks in equal proportions, 25% each since inception in San Francisco. I released that out February 9th. It's beating the market, 37.2%, 25.5%. I think it's a great way for investors to get exposure to the healthcare market without putting all of their eggs in one basket. Steve, which one do you buy first? I think you got to go with Teladoc, man. They're just making real waves in this virtual healthcare space. Aaron Bush, what are you looking at this week? Looking at Carbon Black, ticker CBLK. This is another recent IPO, an interesting cybersecurity

company. The company has been around several years, but it's actually acquired its way into a competitive position in next-gen endpoint security, so essentially security around devices that connect to a network. They're also becoming a cloud company. They haven't always been. revenue growth is around 35%, but their cloud growth is over 200% right now. So as this becomes a larger percentage of revenue, it should accelerate the business. Steve, question about Carbon Black. Given that we tell people to wait on IPOs, how much longer should we be waiting? I think it just depends on the company. I don't think you always have to wait on IPOs. I think a lot of times some great market-beating companies are great buys at the very beginning.

Steve, you got something you want to add to your watch list? I think I'm going with Teladoc. Good man, good man. Alright, Jeff Fischer, Jason Moser, Aaron Bush, guys, thanks for being here. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido, our producer is Mac Greer. I'm Chris Hill, thanks for listening, we'll see you next week.