After disappointing quarterly earnings last week, cable networks hope the skinny bundles and over-the-top services that are reportedly killing pay TV will one day be its savior.
Viacom, The Walt Disney Co., Time Warner Inc. and CBS all released quarterly earnings last week and with one exception — CBS — all reported continued subscriber softness because of skinny bundles and OTT.
Viacom stock fell the hardest (21% on Feb. 9) due to other issues, mainly surrounding the failing health of founder Sumner Redstone and his decision to anoint CEO Philippe Dauman as chairman. But others felt pressure as the declining subscriber base cut into ad revenue and affiliate fees (see chart).
At Disney, which had taken the most serious blows after Nielsen said ESPN, its flagship sports channel, lost 3 million subscribers last year (since amended to 1.5 million), chairman and CEO Bob Iger tried to calm investor fears. ESPN has actually added subs in the past few months, Iger said, as it struck deals to include its networks in slimmer video packages.
Viacom continued its downward spiral, as ad revenue dipped 4% and affiliate fees were flat. Dauman desperately tried to convince investors and analysts that his team had a turnaround plan in place and lashed out at “naysayers” who he said “distorted the facts.” Shareholders weren’t buying it, sending the stock down 21.5% on Feb. 9 and another 4.5% on Feb. 10. Shares were up slightly to $31.70 each in early trading Feb. 12.
At Time Warner Inc., HBO chairman Richard Plepler said OTT service HBO Now has about 800,000 subscribers and is focusing on growing the service beyond its initial target of 10 million broadband-only homes.
Plepler said HBO will increase marketing efforts for HBO Now and get the service on new platforms like PlayStation and Xbox consoles, which currently account for about 20% of the usage of its authenticated online service HBO Go. New content from former The Daily Show host Jon Stewart, ex-ESPN pundit Bill Simmons and Vice Media also should help grow subscribers.
While some analysts expected HBO Now to have between 1 million and 2 million customers by now, Plepler rejected the notion that the service is not resonating with distributors. And he said HBO is supportive of however affiliates want to sell the OTT service.
CBS chairman and CEO Les Moonves concentrated on retransmission consent and affiliate revenue growth — up 15% in the quarter — adding that CBS is on track to grow retrans fees to $1 billion in 2016 and $2 billion by 2020.
Skinnying Down
Skinny bundles continued to eat away at some content providers’ ad-revenue and affiliate-fee growth in the calendar fourth quarter.
Ad-Sales Growth Affiliate-Fee Growth
Disney . . . . . . . . . .25%** . . . . . . . . . . . . . 3.5%
Turner . . . . . . . . . . . . . . 5% . . . . . . . . . . . . . . . . . . . . . flat
Viacom . . . . . . . . . . . . . -4% . . . . . . . . . . . . . . .flat
CBS . . . . . . . . . . . 1% . . . . . . . . . .. . . ………… 15%*
* Includes retransmission-consent fees ** For ESPN, includes additional college-football bowl games in the quarter
SOURCE: Individual companies
