Though investing in traditional media presents a challenge for even the most adept trader, media analyst Doug Creutz thinks CBS may be the safest bet.
"The reasons for that have really been two-fold. One is they don't own any basic cable network," the analyst said. "We think that basic cable is kind of the weakest point of the media ecosystem because that's where you're really getting hurt by subscriber losses. Cable networks have always been heavily dependent on their affiliate fees to generate revenue and profit and those are under pressure."
Media giants across the country have been scrambling to adapt as internet-based content providers drain revenues once thought to be monopolized by a few industry titans. But with technology companies like Amazon, Netflix and Facebook developing film or television offerings, many Americans have decided to cut the cord, leaving CBS with a small advantage, Creutz said.
"Because they don't own basic cable networks, they have a little bit more freedom what to do with over the top [distribution]," he added. "They've created CBS all-access, which is an over the top option to get CBS … they're able to price those at a level where those are actually more profitable products for them than just getting a subscriber through a cable company."
Creutz is a senior analyst at Cowen covering the media and entertainment sector. Prior to joining Cowen in 2003, he worked in finance in the managed care industry and received his MBA from the NYU Stern School of Business.
He also discusses:
- Disney's venture into over the top distribution.
- A host of ongoing M&A for sector giants.
- Why the video game industry is "in a great spot."