Whoa! Television must be dead. Even the Wall Street Journal is starting to smell the corpse:
Note to Media Investors: TV Isn’t Quite Dead Yet
by Paul Vigna
The media sector got walloped last week, hit hard by investors fleeing amid the panic of the “cord cutters,” people who are dropping their cable packages in favor of Internet-based platforms like Netflix , Hulu, YouTube, or Amazon. Far from a sudden crash, however, it seems that Wall Street is just starting to take seriously a phenomenon that’s been building for year.
As you’ll recall, the selling started after Walt Disney Co. noted on a conference call to go over second-quarter earnings that growth at ESPN – one of the most prominent and profitable cable channels – was weaker than the Street expected. Forget the fact that the movie business drove profits up 11%. Forget the fact that Disney is relaunching a little movie franchise later this year called Star Wars. Cable is 46% of Disney’s operating income.
The flames started by Disney were then fanned by Viacom Inc. when it reported weak advertising and viewer numbers. Suddenly, the cord-cutters were undercutting the entire media business. Disney’s shares are down 10% since then. Time Warner Inc.shares are down about 8.4%. 21st Century Fox Inc. shares are down 12%. Viacom’s Class B shares are down nearly 50% since July 11.
Only, the trend is not new and there may not be as many cord cutters out there as some people seem to think. “The the media landscape has been in flux for several years – Wall Street is only beginning to catch up now,” said Nicholas Colas, the chief market strategist at Convergex. (He has a point; we recall writing about the TV versus web issue all the way back in 2007.)