Analyst: Linear viewing’s continued demise

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The death of linear TV is a phrase we have all heard many times, and analyst Michael Nathanson (of MoffettNathanson/MN) admits that conventional wisdom has trained cynical readers –  including our readers – to doubt any phrase that includes ‘the death of…’ in any pronouncement. This idea was best captured by Mark Twain who once said ‘the reports of my death are greatly exaggerated.’ It turns out that the death of any business is usually a slow, drawn-out and deliberate process, states Nathanson.

MN then provides a comprehensive 38-page in-depth analysis of last year’s US broadcast and cable viewing data, and arrives at the conclusion that confirms the “continued demise of linear viewing by viewers ages 2 to 24 as older viewers (ages 55+) still watch TV as they did in 2013. Yet, below the surface, there are both some new frightening signs and a few rays of hope. For starters, live content viewing (which we define as live sports and live news) in 2018 actually increased by +1 percent for People ages 2+ and fell by only -3 percent for People 18-49 with viewing boosted by a reinvigorated NFL and the return of the Winter Olympics. In contrast, non-live content viewing in 2018 – essentially everything else – fell by -6 percent for People ages 2+ and -8 percent for People 18-49. In both demos and content type, the fall in cable net ratings was decidedly worse than broadcast.”

Nathanson says the growth of SVoD has led to structural decline of these assets. “Not surprisingly, networks targeted at Kids 2-11 continue to suffer and are unlikely to re-gain their audience; it now is a share game. While news networks have mean reverted after a few strong years of Trump bumps, cable sports networks and non-scripted genres (I.D. Network, A&E, Food Network) still are hanging in.”

However, overall cable network viewership collapsed in 2017 and further declined in 2018. The year was especially challenged from two of the worst quarterly declines in P18-49 ratings in the past 3 years: 3Q18 down -16 per cent and 4Q18 down -14 per cent.

As to investment opportunities, his recommendation is to back three media stocks (Disney, FOXA, CBS) that have broadcast network assets and/or cable networks focused on live sports and news. “In contrast, while we fully acknowledge that the market has sold these stocks down to record low valuations, we remain cautious on pure-play cable networks. Note that Discovery’s networks hold up much better in our analysis than Viacom or AMCX.”


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