Now that Big Media’s 2Q earnings season is over, the big question on Wall Street is: Did it give us any insight into the future? CEOs’ cheery talk about strong ad sales in TV’s upfront market, the expected bump next year from political ads, and the revenues coming in from online streaming services may be irrelevant if the economy sinks into a deep, new recession. CEOs say they see no evidence of trouble yet. The industry’s leading cheerleader, CBS chief Les Moonves, channeled his inner Buzz Lightyear last week saying that he has “every reason to believe that we will deliver strong results throughout the rest of the year, into 2012 and beyond.” Investors still sliced 6.3% off of CBS’ market value. The Dow Jones U.S. Media Index is down about 16% in the last month as traders anticipate cuts in ad spending, ticket buying, subscriptions — the works. If the pessimists are right, then the race is on: Which company will be the first to change its message from “people will buy media because they have cash” to “people will buy media because it helps them to forget their problems”?
Here are other themes from the latest earnings reports:
Jobs: Media companies still aren’t hiring. No one said that so baldly, but it’s there between the lines: CEOs talked more about financial engineering – cutting costs and returning cash to shareholders – than about spending to become more competitive. Time Warner recorded $24M in layoff-related expenses, quadruple the amount from the same quarter last year, while Viacom spent $14M, up from zero last year. Yet virtually every media company is repurchasing shares or increasing its dividend. The message? CEOs can’t persuade investors that the companies know how to make a decent profit from their cash, and shareholders want it back.
Pay TV: This was “the weakest (quarter) in the industry’s history,” says Bernstein Research’s Craig Moffett. Analysts were startled to see the largest cable, satellite, and telco companies collectively lose about 195,000 video customers. The cord cutters don’t fit the stereotype of well-to-do technophiles. Moffett says that “all the evidence” shows that a growing number of people — especially young adults — simply can’t afford pay TV. Dish Network seemed to confirm that thesis by saying that it will shift its marketing focus to upscale consumers instead of bargain hunters. With the U.S. market stalled, it’s easy to see why cable programmers want investors to look at their expansion efforts in growing markets overseas such as India, Russia, China, and Brazil. “It is the current momentum and potential of our international assets that present a meaningful, unique opportunity for us,” Discovery Communications CEO David Zaslav told analysts. (more…)