Google (NASDAQ:GOOG) recently announced an expansion into video rentals on its website YouTube. The company is now launching movie rentals for its Android platform that will be seamlessly integrated across all Android devices. With new apps coming for Android-based phones and tablets, consumers will have easy access to the rentals from any Android device. While this move does heat up competition among other video rental players like Apple’s (NASDAQ:AAPL) iTunes and Netflix (NASDAQ:NFLX), we focus here on how it affects wireless operators like AT&T (NYSE:T) and Verizon (NYSE:VZ).
Google Influencing Consumer Behavior – AT&T & Verizon Benefit
What Google appears to be influencing consumer behavior, similar to what Netflix has done in the past, by making it easy and convenient for Android users to rent and watch movies. This is effectively a marketing technique, and one can draw parallels from smartphones like Blackberry and iPhone. Both Blackberry and iPhone have enjoyed benefits from early proliferation of certain services (push email for Blackberry, app store for iPhone). Now with Android releasing its own app for movie rentals, this could alter usage and spur more data consumption. The beneficiaries here would be companies like AT&T and Verizon. In fact, AT&T has increased its roster of Android phones significantly in last few quarters in order to mitigate the impact of iPhone migration.
In short, Google is essentially helping telecom operators drive data revenues by encouraging consumers to watch more videos on mobile devices. You can drag the trend line in the interactive chart above to see how increased data revenue per user can affect AT&T’s stock value.
Our price estimate for AT&T stands at $38.08, implying a premium to market price.
See our complete analysis for AT&T’s stock here
Our price estimate for Verizon stands at $33.04, suggesting a discount to market price.
