As the world of traditional media continues to navigate a chaotic world of cable-cutters and dedicated television streamers, the stock market remains unfriendly to major networks.
Companies like Disney, 21st Century Fox and Time Warner are continuing to post reduced growth and rapidly diminishing values are following. Disney started the fire when it announced lower-than-expected numbers in August and followed-up by issuing reduced growth expectations for its cable network division, which contributes about half of the company’s operating income.
How and who? Although the second quarter of 2015 was the worst by far for pay television subscription losses, the third quarter 2015 is expected to post only modest losses from both cable and satellite companies. The question isn’t “when” or “if,” it’s now “how” and “who.” How will cable companies make up ground? Who is currently controlling media dollars?
“The bigger issue here is not just whether people cut the cord, but who has the bigger negotiation leverage: the distributors or the media companies,” said Kannan Venkateshwar, a media analyst with Barclays, in an interview with the Wall Street Journal. “Some of the negotiating leverage seems to be moving to the distributors.”
Stand-alone streaming services. Cable companies that have introduced stand-alone streaming services, like Time Warner’s HBO and CBS Corporation’s CBS and Showtime may weather the storm better than others, but ultimately cable companies as a whole are going to have to make some very hard decisions in the near future. Partnering with Netflix is a double-edged sword, since there’s a chance that Netflix may cannibalize traditional ratings and ad revenue.
On the other hand, Netflix and its army of 70.4 million global subscribers are helping to prop up revenue in the short-term. Although companies continue to sell licenses to Netflix, 21st Century Fox, Comcast and Disney are working hard to establish Hulu as a legitimate (and ad-driven) alternative.
When asked about the state of traditional media outlets today, Anthony DiClemente, Nomura media industry analyst, responded “The United States [market] is a slowly melting ice cube. It’s just a question of how quickly the ice cube melts.”
Whether industry leaders will choose to open their own streaming services, work to ensure their channels are included in new, smaller cable bundles or partner with Netflix and Hulu is anyone’s guess. The one thing everyone can agree with is that the industry is shifting hard and marketers have to shift with it.