Here’s how Telstra Corporation Ltd could benefit from television’s demise

According to research by ZenithOptimedia, advertising spend on the internet is set to overtake spending on television advertisements by 2017.

Driving the structural shift towards the internet are increased advertising spends on social media, online video and paid search platforms.

Arguably it’s not an unexpected prediction, however, it may still be a wake-up call for some investors.

As investors in commodity businesses have experienced (painfully) over the past few years, just a small shift in supply and demand can have a dramatic effect on price.

A similar fate could be awaiting television network owners…

Recent news reports have speculated that Telstra Corporation Ltd (ASX: TLS) – which owns 50% of pay television business Foxtel – is considering offloading the Foxtel asset due to its poor outlook. That outlook is based on fierce competition from online streaming providers such as Netflix.

With all three of Australia’s major free-to-air (FTA) networks listed on the ASX, shareholders of Seven West Media Ltd (ASX: SWM), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Ten Network Holdings Limited (ASX: TEN) could all be facing structural challenges even greater than what the market is currently factoring in!

More upside than downside

Despite the worrying outlook for FTA networks and Foxtel, arguably the outlook for Telstra remains bright.

Even if Foxtel is divested or experiences significant earnings declines, ultimately Telstra’s market-leading exposure to higher future demand for internet services and online data outweighs the possible lost earnings from Foxtel.

Why These 3 Blue Chip Shares Could Be An Even Better Bet Than Telstra

Discover The Motley Fool's top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.