The media industry will be releasing second quarter earnings in the coming weeks, starting Tues with Verizon and Comcast’s results. Large distributors will lead off the reporting period, with programmers quickly following. Here’s a tip sheet for what to keep an ear out for during all the numbers talk.
Merger Talk: With the FCC officially opening the review on Comcast-Time Warner Cable and AT&T and DirecTV expected to begin soon, companies may be less reticent to give their opinions on the merger proposals. But with the news that 21st Century Fox made a failed bid for Time Warner, there’s also interest in what content companies might say on consolidation in general. AMC Networks and Scripps Networks Interactive are viewed as attractive targets. Both companies report on August 7. While some feel like network consolidation is inevitable, not everyone is a fan. BTIG’s Rich Greenfield believes Fox will be victorious in its quest for Time Warner, but attributes its interest in a desire to establish a Disney business model. He warns that other companies getting bigger just to have more nets doesn’t make sense because it’s getting increasingly difficult to program multiple networks. “At the same time, advertisers are becoming more selective and searching for content that really has a call-to-action, must watch live impact on consumers,” Greenfield wrote in a blog. “Industry chatter will now turn to everybody is buying everybody else and ‘who’s next to fall,’ but we suspect it would be a mistake to use Fox’s pursuit of Time Warner as a bellwether for cable network consolidation.”
Regulation: Government regulation impacts investment—any CEO can tell you that. With the FCC knee deep into its net neutrality proceeding, a telecom act rewrite on the table and some real talk about changes to broadcast-friendly rules, such as network exclusivity, look for any reading of D.C. tea leaves by distributors. Of course, just what Congress may do is always hard to predict. It’s made more difficult by the upcoming mid-term elections. Regardless of the outcome at the polls, there are some guaranteed changes with Senate Commerce chairman Jay Rockefeller (D-WV) retiring at the end of this session. He’s served in the post since 2009, when he took over the seat from Daniel Inouye, who passed away in 2012. His priorities have included Internet privacy and security, E-rate and protecting children from violence and objectionable content in media.
Advertising: With upfronts recently wrapping, there will be general reviews from the networks. In addition to that, there could be some color on digital media. “One key theme likely to emerge from 2Q14 earnings will likely relate to an ongoing debate which we might characterize as radical-ism vs. incremental-ism with respect to how advertisers are incorporating digital media into their broader media plans,” Pivotal Research analysts told clients in a 2Q preview. Pivotal thinks digital falls on the incremental side, predicting that national TV ad growth should be about 2.5% for the quarter. “Similarities in growth rates for national TV and total advertising illustrate well that meaningful amounts of money are not likely shifting from TV budgets to the web (this also reflects most of our conversations and correspondences with the media buying community in recent weeks),” the firm said. “Instead we continue to see shifts as originating from print-based media to digital, and within digital from display to online video and publishers such as Facebook and Google, while traditional TV advertising continues to fare well in terms of retaining share or losing only marginal percentages of typical large advertisers’ budgets.”