Media Earnings: Ads & Digital In the Spotlight
We're headed into a slew of earnings this week from media giants—on both the content and distribution side. Whether we're talking about content creators like News Corp and Time Warner or kings of distribution like Comcast and Time Warner Cable, there are a couple key themes that will impact the whole industry.
Here's what to watch as earnings reports roll out this week and next.
Discovery Communications reports Tuesday after the bell. Wednesday we'll hear from Comcast, Time Warner and AOL before the bell, and News Corp after the market closes. On Thursday DirecTV, IAC, Scripps Networks Interactive and CBS report.
Some media giants are more exposed to the advertising market than others -- at one extreme, CBS generates about two thirds of its revenue from ads -- but they all are impacted by the ad market. Wall Street will be closely watching to see whether advertising holds up despite volatile financial markets. Plus, there are some tough comparisons to last year's ad-rich mid-term campaign season. On the upside, Upfront ad sales for the fall TV season were particularly strong. On the downside, ratings have been fairly weak, which should hurt pricing in the last-minute or 'scatter' market.
The media giants have been busy striking a slew of licensing deals with Netflix and Hulu -- are these deals starting to boost their bottom lines? These deals are monetizing old library shows and movies, so the revenue should be incremental. The question is whether it's enough to compensate for declines elsewhere, like DVD sales and box office.
All these digital streaming deals also impact cable and satellite companies. We'll see if customers, now that they have a raft of new digital content options are "cutting the cord," or "shaving" the cord-- switching from higher-tier to bare bones options. Subscriber counts will be very much in focus at Comcast and DirecTV. Time Warner Cable and Cablevision have had a rough go so far this earnings season -- both dropped on disappointing results.
As cable and satellite carriers face more competition -- from each other as well as digital options-- the cost of content is another key issue. DirecTV just yesterday resolved a standoff with Fox over fees. Now that media giants have so many more distribution options, are they strong-arming distributors to pay much more?
Media companies offer unique insight into what consumers just aren't willing to live without, and what they're willing to give up when unemployment is high and stock markets are in turmoil. Of course there will be plenty of attention on Disney's numbers next week-- theme park attendance and consumer products-- but even this week's reports can be illuminating. And of course, there's the question of whether consumers are 'cutting' or 'shaving' their cable and satellite TV bill. Are new apps like HBO Go making it worthwhile to keep that premium cable channel? Is the investment in new shows on Showtime paying off?
It's worth digging into home entertainment numbers, which speak to consumer spending as well as digital trends. The Digital Entertainment Group, on Monday reported a 5 percent increase in industry wide revenue for the quarter, driven by a surge in Blu-Ray sales. This is by no means an about-face of the overall downward trend in DVD sales, but it speaks to the strength of franchise titles like "Transformers" and "X-Men." In addition to DVD sales, we should watch whether video-on-demand revenue is helping compensate for DVDs decline.
I'll be reporting on the numbers-- watch CNBC and check back on the blog.
Questions? Comments? MediaMoney@cnbc.com