Following on from our blog of August 6th, about the decline in TV viewing as the audience moves to digital and the consequent shift in Ad budgets, it's now being reflected in TV companies stock.
Last week, 37 Billion usd was wiped from shares in Viacom, Time Warner, Fox, Walt Disney and 5 other major broadcasters. Viacom fell -8% on Wednesday and -14% Thursday being the worst hit.
Lower than expected quarterly earnings was one reason but underscoring it all, is the disruption being caused by YouTube, Facebook, Amazon, Netflix (63 million subscribers) and others, as they erode traditional TV subscriptions. It's now a structural issue in the ongoing shift away from live TV as well as, a shift to lower subscriptions online.
Of course, some large media organisations (such as RTE in Ireland) are immune from these market shifts as they receive state support (probably 200 million euro a year for RTE). One questions why and how long that will last?
In the same week, The New York Times reported lower than expected quarterly revenue too including a fall in print advertising sales. Again, the switch to digital platforms is the key here as their traditional revenue fell -12.8% but their digital revenue was up +14.2%. Up, but not by enough to compensate. Still, they brought in 148 million usd.
So the market is starting to question the future role of traditional media companies in the digital age.
The corollary of that, is that you're likely to see a rise in the stock of digital media companies filling the gap. But definitively, for traditional TV specially, the game is up.
ITV, is a traditional TV broadcaster that's showing growth?
Why?
Because of the resurgence of advertising in the UK but largely because, it has moved to become less dependent on advertising (!) and more into content creation. It understands that the traditional TV model is diminishing so it's now more of a content creator.
It sells programmes to other broadcasters (including BBC) but also to new buyers like Netflix, Hulu and Xbox.
The production side, ITV studios, showed a +24% 2013 profit increase (£133m) on turnover of £857m. They now have 60 shows on US channels (more than 50% of their revenue is overseas) such as 'Hell's Kitchen' on Fox and Mr. Selfridge is in 150 countries (including being streamed on Amazon Prime).
Last year they spent £66m on buying independent content producers and yet acquisitions added £97m to ITV's revenue. Good result. More funding for acquisitions is planned too, possibly nearly £200m as a war-chest in order to develop more content to sell.
There's little doubt that ITV are learning the online lessons and looking at it as an opportunity to become programme makers rather than seeing it as a threat. Online in essence, has opened up a market of content purchasers.
In other words, whilst the likes of Netflix are very techy, they're not programme makers (although they are getting there now) whereas ITV have a long history of making strong programmes. So you match one against the other.
And you start seeing TV Ad revenue as not being the driver anymore.
Looks to me, that ITV have got it.
If ever you wanted an example where digital broadcasting is eating into traditional Television, here's one.
YouTube have designed the 'YouTube music awards' on November 3rd, a lovely idea in itself because of their younger profile and the fact that music is a such a big YouTube driver. A lot of stars would never have got a music deal (such as Psy) were it not for exposure on YouTube.
However, the show which features Lady Gaga, Eminem, Arcade Fire and loads of other top acts, will be broadcast live.....on eh,YouTube. The 90 minute show will be driven by awards from votes and data about viewership on YouTube.
YouTube will also be showcasing contending artists in the build-up. And some of those artists will not be hugely well known generally but big on YouTube.
But this will be bigger than MTV.
So here is a digital channel that's generating its own awards that it will broadcast itself. So no need for traditional TV there at all and in fact, they're being left out in the cold as they won't have the content. They won't be able to broadcast the show.
So when they tell you TV viewing is growing, be careful out there.
Cause it sure won't be on November 3rd amongst that younger audience who'll be glued to YouTube.
YouTube and exclusive content on Netflix are killing Television.
This is only the start.
