by: Idris Mootee
Here’s an interesting question: Is traditional media on a permanent decline? Will they ever recover in full when this downturn is finally over? The media companies are watching their life blood -- advertising -- erode at a rate not seen in a generation. No one knows how this will turn out as evidence of audiences increasingly get more and more fragmented and less accessible to mass marketing is becoming clear.
Disney’s CEO Robert Iger told analysts last week that some of the entertainment empire's businesses, like its broadcast television network, are feeling "signs of secular change as competition for people's time is increasing and the abundance of choice is allowing consumers to be more selective. He was suggesting that something more than just the economic downturn was behind Disney's 32% drop in fiscal first-quarter earnings and 8.2% revenue slide.
News Corp.'s recent results underscored the reasons for concern. The company swung to a loss for the quarter totaling $6.4 billion thanks in part to an asset impairment charge of $8.4 billion stemming from the 70% drop in its stock price over the last two years. Its revenue was down 8.1%. Time Warner Inc., with its stock down 56% over the last 2 years, logged a $16 billion quarterly loss last weel with asset write-downs totaling $24 billion as its magazine publishing and online media segments suffered sharp declines. This is serious money that they are losing here. CBS shares are down 73% over the past year.
I don’t think the valuation will recover anytime soon even if the advertising money returns. This is simply a perfect storm as they write down bad acquisitions over the last 10 years and the current stock price is reflecting those write offs. Many of the digital media acquisitions were 1/overvalued 2/lack of synergistic value 3/lack of a strategy to monetize these assets.
Media fragmentation is a good thing and a bad thing. A bad thing for advertisers since it is more difficult to effectively reach the mass. The good thing it is now possible to use media to build communities and engagement. The future is niche media and niche is the new mass. Newspaper and TV may end up following the niche model. TV and newspaper will not go away, but will be transformed.
We are not watching less TV today; although we ignore most of the ads but still leave it on in the background while we are serving the net. According to Nielsen’s findings, Americans watch more TV than ever before. The results show that time in front of the tube actually ratcheted up 4% for the average American from only a year ago. Among traditional TV watchers, those aged 65 and older watched the most, while the 35- to 44-year-old age bracket took the cake for Internet use. Those aged 18 to 24 prevailed in a more specific category: watching video on the Internet, living up to the “YouTube generation” moniker.
TV is not dead but it is losing its influence as it fades into the background. Broadcast media just has to be Google-ized and Facebook-erized.