Yesterday traditional media stocks were hammered. Comcast, Time Warner, 21st Century Fox, CBS, Viacom, Disovery, AMC and even Disney were all included in the fall. Shares of Discovery fell 12 percent.
Investors are waking up to the fact that the business model of ‘cable tv with commercials people will watch’ is no longer on firm ground. Instead, there’s a massive shift to on-demand streaming television that doesn’t include advertising. And of course the fact that a large percentage of Millennials are watching less TV and spending more time online.
Richard Greenfield, a media analyst, says that ‘The consumer is shifting, and these media companies are not built to take advantage of the technological disruption.’
On the flip side of this equation are Netflix and Amazon – who both provide a plethora of on-demand programming. In the 2nd quarter of this year, Nextflix added a record 3.3 million global streaming customers. Total membership now stands at 65.6 million. Charles Ergen, Chairman of Dish Network says, ‘Netflix is the most powerful content aggregator in the world today, and there’s nobody that’s even close.’
Netflix stock is at a record high. And Facebook – also near its stock price peak – had an advertising revenue increase of 43% in the second quarter.
People are still watching television. What matters is that they’re watching it differently. And as the shift continues to more time spent online, that’s where advertising dollars will flow. Just as the music business has had to evolve from sales of compact discs to streaming music, media companies will have to contend with a consumer that behaves differently. It’s a brave new world, and only those who can adapt will thrive.