×
You will be redirected back to your article in seconds

Media Congloms on Pay-TV Shrinkage: What, Us Worry?

The pay-TV business is in decline, and the growing tide of cord-cutters helped spook Wall Street into a major selloff of media stocks in August.

But to hear top execs from big media conglomerates tell it, the investor panic was overwrought — and the TV networks in their own portfolios, at least, will enjoy continued revenue growth in the years ahead.

Top brass from Disney, CBS and Time Warner voiced a similar refrain at this week’s Bank of America/Merrill Lynch 2015 Media, Communications & Entertainment Conference. The execs insisted that subscription TV remains healthy, and each claimed their own company will thrive despite the headwinds:

  • Disney COO Tom Staggs: “I think, yes, the market overreacted. We feel good about where we sit. ESPN continues to be one of the most important and valuable brands in programming.”
  • CBS chief Leslie Moonves: “We’re not selling 30 channels that people don’t want to pay for… Everybody has to have CBS.”
  • Time Warner CFO Howard Averill: “We continue to be really well positioned. We think the biggest and best networks are going to gain share and become more valuable… At Turner, we are seeing modest sub losses that are in line with the industry… (but) we’re confident we’ll accelerate (affiliate) fees into the mid-teens into 2016-17.”

Their message to the Street: Some networks may be sweating bullets about cord-cutting or cord-shaving (downgrading to smaller channel bundles), but ours will be just fine.

Are these guys in denial? Cable and satellite TV operators posted their heaviest losses ever for the second quarter of 2015. MoffettNathanson estimated a drop of 566,000 net subscribers for the period, while SNL Kagan put it even higher at 625,000. True, that’s less than 1% of the total U.S. households that subscribe to TV. But the bloodletting may get worse in the months ahead, as more consumers scrap pricey pay-TV packages for a diet of Netflix, Hulu and other over-the-top services delivered via Apple TV, Roku or other devices.

The sky-is-falling narrative punished media stocks last month, pushing Disney, Time Warner, Viacom and others down by double digits, although the investor panic also stemmed from broader macroeconomic trends like worries over China’s economic growth. The sector hasn’t recovered, and perhaps may not return to the high valuations anytime soon: Since Aug. 4, Disney shares are down 16%, CBS is off 17%, Viacom has dropped 18% and Time Warner is down 19%.

And while media bigwigs keep saying everything is pretty much hunky-dory in the traditional pay-TV space, at the same time they’re hedging their bets if — or maybe when — the bundle really starts to implode.

Time Warner’s HBO has launched the direct-to-consumer HBO Now service, as have CBS and its Showtime premium network and Viacom’s Nickelodeon. Disney hasn’t pulled that specific trigger (yet?), but it’s worth noting the Mouse House was first in line in cutting a deal for ESPN and other nets to be distributed on Dish Network’s Sling TV skinny OTT service.

Here’s how Averill put it: “On the one hand, we want to make sure we strengthen the (existing) ecosystem” by providing distributors additional in-season VOD rights and investing in new advertising programs, he said. “At the same time, we are getting better at identifying (audiences) outside the ecosystem.”

The trick for media companies is to grow the entire pie, in terms of viewers and revenue, instead of just shifting those from the pay-TV column to the OTT side. For HBO Now, Averill said he’s confident the service is not cannibalizing the current business, with a “de minimis” number of subs having canceled traditional HBO or pay-TV packages in favor of the OTT offering.

Some analysts think the large, entrenched players aren’t moving quickly enough. Sure, most Americans will continue to pay cable, satellite or telco companies for an $80-plus-per-month bundle, with live sports a key anchor, BTIG Research’s Rich Greenfield wrote in a blog post Friday. But media companies, facing an torrent of new OTT options like the newest generation of Apple TV, are running out of time to shift gears.

“Legacy media management teams need to immediately shut down capital return initiatives (dividends/share repurchase) and focus on transforming their business models, no matter how painful in the near/intermediate term,” he wrote.

More Biz

  • Katie Couric Sheryl Sandberg

    Katie Couric Steamrolls Sheryl Sandberg in Roving Vanity Fair Summit Interview

    Sending a jolt through a luxurious and excessively polite afternoon in Beverly Hills, veteran journalist Katie Couric delivered a relentless series of hardball questions to Facebook chief operating officer Sheryl Sandberg on Tuesday. Speaking in conversation at the sixth annual Vanity Fair New Establishment summit at the Wallis Annenberg Center for the Performing Arts, Couric’s [...]

  • Jussie Smollett

    Judge Refuses to Dismiss Chicago's Lawsuit Against Jussie Smollett

    A federal judge on Tuesday refused to dismiss a lawsuit filed by the City of Chicago, which is seeking to recoup investigative costs from former “Empire” actor Jussie Smollett. Judge Virginia M. Kendall rejected Smollett’s contention that he should not be made to pay $130,000 in police overtime costs, plus $260,000 in damages, because he [...]

  • It Is 'Unlikely’ That PledgeMusic Artists

    It Is 'Unlikely’ That PledgeMusic Artists and Creditors Will Be Paid, Receiver Says

    PledgeMusic, the direct-to-fan marketplace that went out of business earlier this year, was more than $7.4 million in debt when it entered liquidation, and its receiver says it is “unlikely” that artists and others owed money by the company will be paid, according to a report from the bank-appointed receiver. “I do not anticipate that [...]

  • Lori Loughlin

    Lori Loughlin Charged With Bribery in College Admissions Case

    Actress Lori Loughlin and her husband, designer Mossimo Giannulli, were indicted on a charge of conspiring to commit federal programs bribery on Tuesday, in connection with allegations that they paid $500,000 to get their daughters into the University of Southern California. Loughlin and Giannulli already faced charges of conspiring to commit mail fraud and money [...]

  • Gary Newman

    Fox TV Group Alum Gary Newman Joins Attention Capital as Executive Partner

    Former Fox TV Group chairman Gary Newman has joined Attention Capital, the startup venture launched earlier this year by another Fox alumnus, Joe Marchese. Newman and another media biz veteran, Lisa Gersh, were named Tuesday as executive partners of Attention Capital. Newman will focus on acquisition and investment opportunities. Marchese, who previously headed advertising sales [...]

  • Clio-Brand-Storytelling-Award

    Clio Awards, Brand Storytelling Team to Launch 'Storytelling for Good' Award

    Clio, the international advertising awards competition, announced Clio Brand Storytelling, a new program in partnership with Brand Storytelling, a media company exclusively built to support and inspire investment in the practice of brand-funded content. The inaugural Storytelling for Good Award will celebrate branded entertainment and content that promotes or creates awareness for a cause, foundation, [...]

  • Matt Lauer Kurt Sutter

    From Sutter to Lauer, Hollywood Sees a Flurry of Letters From the Edge (Column)

    Let’s talk about the whacked-out letters that hit the media sphere in the past eight days. One was that bizarre mea culpa dropped Oct. 17 by the no-holds-barred showrunner Kurt Sutter in response to getting canned from his series “Mayans MC.” No stranger to complaints of unprofessional behavior on his sets over the years, Sutter [...]

More From Our Brands

Access exclusive content