The Edge on Why Major Media Stocks Are Struggling – Companies such as Fox, Disney, Netflix, Time Warner and Viacom once seemed indomitable, but now are they abominable?
Aug 12, 2015
By Lou Carlozo, Staff Writer U.S. News & World Report:
Assuming the late Marshall McLuhan could retool his famous maxim, “The medium is the message,” he might look at the stock market and quip: “The message is the media, and it’s ugly.” Media companies that have performed well this year now hang on to future gains by a thread. Or make that a cord. Observers say that anxiety over the grim prospects of cable TV – known anecdotally as “cutting the cord” – lie at the heart of last week’s stock stumble. Major media stocks took their worst weekly tumble in nearly a decade, and that’s saying something considering how bullish the market has been in 2015. The wounded include Walt Disney Co. (ticker: DIS), which is down 9 percent, and Discovery Communications (DISCA), down 5 percent. Twenty-First Century Fox (FOX) is off more than 7 percent, and E.W. Scripps Co. (SSP) is down 8 percent. Viacom (VIA, VIAB), the home of cable channels MTV, Comedy Central, BET and Nickelodeon, has collapsed more than 19 percent.
There have been some rebounders, though. Time Warner (NYSE: TWX) was off 15 percent through Thursday, but recovered more than a third of that. Ditto CBS Corp. (CBS), which made up half of a 9 percent loss, thanks in part to second-quarter results that beat Wall Street’s expectations. Viewers seem to be turned off by commercials – a primary driver of revenue – now that they’re exposed to ad-free entertainment platforms such as Netflix (NFLX). Pragnya Pattnaik, senior analyst at The Edge Consulting Group, points to the appeal of a media world without inane infomercials and mind-numbing jingles. “Due to the migration of viewers from ad-supported platforms to non-ad-supported or less-ad-supported platforms, we expect the U.S. TV industry to witness structural decline,” she says. The changes will force big media companies to…