This week we’ll find out a lot about the health of the television business as most of the big media companies report earnings.
Scripps Networks Interactive and The Walt Disney Co. report how they did in the calendar second quarter on Tuesday, but the big day is Wednesday when Discovery Communications, Time Warner, CBS and 21st Century Fox report. Viacom will tell its fiscal story on Thursday.
Analysts will be looking closely at a few issues.
1) Ad Revenues
The big dark cloud hanging over the TV world is declining advertising revenues resulting from dropping ratings and the growing attractiveness of digital video. The ad revenue numbers the companies report will provide a look in the rear view mirror, while executive comments about the upfront will offer a glimpse of the future.
“Overall, fear of a significant decline seems to [be] overblown as a combination of traditional ad sales and digital helped keep market afloat,” said Marci Ryvicker of Wells Fargo in a recent note.
2) Cord Cutting and OTT
The other huge issue facing the industry is on the distribution side, where cord cutting, over-the-top and skinny bundles are changing what had recently been seen as an ever-growing source of revenue.
Analysts are looking forward to hearing some specific numbers from Time Warner, CBS and Viacom about their recently introduced OTT products. Also for signs about how declining sub numbers are affecting ESPN, a powerhouse that provides a big share of Disney’s profits.
“Investors are craving any metrics on HBO Now subscriber uptake and characteristics (demos, current pay TV subs?) – but we doubt they will get much. It's still very early days, and we doubt Time Warner feels compelled or obligated to disclose any details anyway (they barely do for base HBO),” wrote Todd Juenger of Sanford C. Bernstein. “How much cord-cutting/cord-shaving is going on, and how much can that impact the telegraphed affiliate fee acceleration at Turner?”
3) The New Murdoch
Juenger is also looking forward to hearing from James Murdoch, newly anointed as the successor to his father Rupert Murdoch as CEO of 21st Century Fox. “It will also be James Murdoch's first turn leading the call as CEO, a well-received showing could also be a positive factor,” he said.
“What we really are desperate to hear, of course, is full acknowledgement of the secular problems facing TV advertising, and some positive solutions on how to address it over time. Which we think is all about the networks reclaiming ownership of on-demand viewing (which they have effectively outsourced to the SVODs). While this won't solve the advertising problem, it would at least strengthen hopes to maintain affiliate fees and the bundle,” Juenger said.
