The evolution of wireless technology and growing demand for faster connections and rapid access to the Internet are key trends that will shape the US telecommunications, media and technology sectors this decade, said Moody’s Investors Service in a new report. Looking specifically at television, though, Moody’s isn’t buying the idea that over-the-top (OTT) broadband video competition is going to wipe out broadcast and cable operators anytime soon.
“Even with the advent of Internet TV, the broadcast and cable networks that invest heavily in exclusive content rights to popular programming and sporting events that command high viewership ratings will be protected from online competition over the next 10 years,” wrote Sr. VP Neil Begley in his section of the report, “2020 Vision: US Telecom, Media and Technology”.
“The economics associated with the existing mass-market TV-advertising and carriage-fee model are so strong that it is the primary reason a new online model will not be embraced by the networks or the content producers that own them, a high barrier that will help insulate the industry’s profits and cash flow over the decade,” Begley concluded.
The “wild card,” he noted, is whether Google or Apple will be willing to make the financial commitment to compete for sports-content rights and invest in production to put their own programming on the web in competition with the traditional content companies. “But this is not highly likely as they would need to create or buy a lot of programming to be successful, which would be very costly and outside their traditional area of expertise,” he noted.
At the local level, Moody’s VP and Senior analyst Carl Salas wrote that while broadcast TV station owners will continue to lose viewership shares to cable networks – and perhaps even to new broadband competitors, broadcast TV “will still generate a sizeable share of local advertising dollars as the content will continue to generate the largest audience.” Also, he noted, broadcasters will embrace additional distribution platforms for their content.
The big picture, according to the Moody’s report, is that positive credit trends are in store for the wireless telecommunications and technology hardware sectors, but wireline and newspapers must transform or they will suffer.