Entertainment Stocks Tumble on TV Sub Losses, Ad Trend Concerns
Entertainment Stocks Tumble on TV Sub Losses, Ad Trend
Concerns
by Etan Vlessing, Georg Szalai 2:48 PM PDT 5/3/2017
Big media conglomerates saw their shares sell off after
Turner quarterly ad revenue disappointed and Hulu unveiled its live TV bundle
and pricing.
Media stocks got crushed on Wednesday as Time Warner
earnings beat Wall Street expectations, but its Turner TV network's advertising
revenue disappointed, and Hulu unveiled its live TV bundle and pricing.
With analysts warning new digital platforms like Netflix
and Hulu were undercutting broadcast profits, 21st Century Fox saw its stock
fall 5 percent to $28.35, Viacom was down 7.3 percent to $41 ahead of a
second-quarter earnings release on Thursday, and AMC Networks tumbled 6.7
percent to $55.24.
Also Wednesday, CBS Corp. shares was down 3.4 percent to
$63.46, Walt Disney's stock fell 2.4 percent to $111.62 ahead of next Tuesday's
earnings release and cable giant Comcast was down 2 percent to $38.54.
After Time Warner — the media giant behind Warner Bros.,
HBO and the Turner TV networks that has agreed to be acquired by AT&T for
$85.4 billion — reported improved first-quarter earnings that exceeded Wall
Street estimates, its shares emerged from the broad market decline relatively
unscathed to close Wednesday down 28 cents at $99.05. But analysts said one of
the drivers of Wednesday's sector sell-off was the fact that its Turner TV
networks disappointed as advertising revenue fell 2 percent.
Hulu Upfront Hypes 'Handmaid's Tale' Success, Shifts Away
From Subscriber Numbers
The decline in media stocks followed Hulu's unveiling of
its long-awaited live TV service with more than 50 channels and costing $40 a
month at the streamer's upfront presentation in New York City, an analyst
report expressing concern about pay TV subscriber trends, as well as Time
Warner management comments on the state of the advertising market.
MoffettNathanson analyst Craig Moffett
pointed to signs of intensified
cord-cutting in the first quarter, which Wall Street observers said
seemed to spook investors and contribute to Wednesday's sell-off. "The
first quarter is usually a seasonally strong one for pay TV. It wasn’t this
year," he wrote in a research note. Moffett said that it was the drop of
762,000 video subscribers was the worst first-quarter loss ever for the pay TV
industry.
Jefferies analyst John Janedis in a report pointed to
advertising trends to explain why media stocks were falling sharply on the day,
saying Time Warner's earnings report and management's comments on the ad market
were to blame. The conglomerate Wednesday morning reported a 2 percent ad
revenue drop at its Turner networks, and Turner CEO John Martin said ad
momentum had somewhat moderated early in the second quarter amid some economic
uncertainty.
He also reiterated that he feels Turner's portfolio of
cable networks is in good shape in the age of streaming video and new digital
distributors, but others may have to trim their channel lineups as "there
are a lot of networks that are in existence today that add no value to
consumers, yet get paid affiliate fees." He added: "Those will
eventually go away. That will be good for us."
Janedis later in the day analyzed what that means for the
broader industry as stocks sold off. "Given the market's reaction to Time
Warner's results, we briefly look at the issues," he wrote in the
introduction to a note to investors. "Comments from management suggesting
that the ad market is moderating, combined with results from [pay TV]
distributors, is driving the negative narrative."
Discussing ad trends, Janedis added: "We've written
for several weeks that the ad market has not improved, with scatter pricing
less robust than it has been over the past several quarters. We continue to
believe that visibility remains less than what it has been and that upward
pricing pressure is more ratings based rather than demand-based."
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