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Short Trader Chanos: 'Awful Big Headwinds' for These Firms

"Technology-driven deflation" via the Internet has compressed margins for all kinds of "middlemen" companies, said James Chanos, president and founder of Kynikos Associates. And expect the trend to continue going forward, he warned.

“First it was music retailers, then video rental stores, and then it was newspapers,” Chanos told CNBC.

“Anybody that sold an analog product that had that product digitized [by others] basically saw its margined compressed or go to zero.”

As for videos and media, Chanos said there’s an “awful big headwind” facing the industry.

“The content owners are going to be the winners,” he said, noting that Comcast is ahead of the trend, as the company made an attempt to bid for Disney in 2004, and now is in the process of acquiring NBC Universal from General Electric.

“The value proposition in this technology-driven deflation goes to both ends of the barbell—it goes to the consumers, maybe some device manufacturers, and the pure content providers,” explained Chanos.

“And it’s going to be at the detriment of the middlemen such as satellite and cable companies—they’re less value-added than they used to be.”

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Scorecard—What He Said:

  • Chanos' Previous Appearance on CNBC (Sept. 21, 2010)

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More Market Intelligence:

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Netflix

Time Warner Cable

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Disclosures:

No immediate information was available for Chanos or his firm.

* NBC Universal is the parent company of CNBC.

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