Better Buy: Comcast Corporation vs. Time Warner (HBO)

By Markets Fool.com

The media market has become a battle of the giants, and Comcast Corporation and Time Warner are Godzilla and Mothra, respectively.

Continue Reading Below

Both companies have diverse empires including cables channels, movie studios, and much more. In Comcast's case, that "much more" means being a top-two cable and Internet provider, while also owning NBC and the Universal Studios theme parks. Time Warner, on the other hand, has a deep cable portfolio along with its crown jewel, HBO.

In many instances, both companies face the same risks, but their differing portfolios also create opportunities as well as ways to stumble. Both are stocks with growth potential, but one clearly outshines the other.

Comcast has Harry Potter attractions at its Universal Studios resorts. Image source: Comcast.

The case for Time Warner

Even though all content companies have to worry about cord-cutting and the slowly shrinking pay-television universe, Time Warner has less to be concerned about than most. The company owns TBS, TNT, the CW television network, Cartoon Network, and its associated Adult Swim lineup -- all channels that people actually watch.

Continue Reading Below

That gives the company continued leverage even in a world where people are moving (slowly) to streaming packages and skinny bundles. For example, DISH Network's Sling TV -- a first-of-its-kind digital streaming live-television package -- contains the various Time Warner channels along with the option to add HBO. That service, which is specifically aimed at millennials, shows that even if people are dropping cable, they will still want the top-tier programming Time Warner owns.

In addition, HBO, which started as a premium cable channel, now has a streaming-only option. That channel -- with its originals, talk shows, sports programming, news, and more -- could also thrive as an option for cord-cutters, perhaps paired with Netflix, Hulu, or another service.

And, like Comcast, Time Warner owns its own movie and production studios it uses to create shows it distributes itself.

The case for Comcast

Comcast has more upside than Time Warner, but its cable business carries more risk, as well. It's possible there will be a tipping point when consumers actually flee traditional pay television. That could put cable providers in a position where they still sell internet, but see revenue-per-customer drop.

That said, Comcast controls the entire pipeline. It makes movies and television shows it can distribute through NBC and its other television properties while also building theme park attractions. The company also owns a number of franchises including Fast and the Furious, Jurassic Park, Minions/Despicable Me, and many more.

Because of that, Comcast can wring more money from each success it has. That's especially true for its movie franchises, which it can exploit in its theme parks, which in turn fuels interest in future sequels. In addition, Comcast also owns the rights to Harry Potter for its Universal Studios theme parks, and the two lands based on that world are massive attractions that should remain big draws well into the future.

Is Time Warner or Comcast a better buy?

Comcast has a bigger risk with its cable business, but that is offset by the increasing need for internet service and its ability to charge more for it. Time Warner has an impressive cable portfolio headlined by HBO, which has tremendous upside, but ultimately, it does not have as many distribution channels as Comcast owns, nor does it have the theme park assets.

These are both good stocks built to survive and thrive in the changing media landscape, but Comcast should be a better performer because of its subscription-based television and internet revenues as well as its theme parks.

The article Better Buy: Comcast Corporation vs. Time Warner (HBO) originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. He is thinking about getting a Universal Studios season pass. The Motley Fool owns shares of and recommends Netflix and Time Warner. Try any of our Foolish newsletter services free for 30 days. 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.