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Inside Big Media’s Q1 Winners & Losers, From CBS to Snap

Cord-cutting and theatrical windows were major themes during the spring earnings season

Another entertainment and tech earnings season has come and (mostly) gone, but certain things remain the same. Amazon and Jeff Bezos own the world, everyone wants to talk about the future of ESPN, and Facebook just seems bulletproof — literally.

One thing that was new this time around was that the scores of filter-happy millenials who bought shares of Snapchat parent Snap just learned what it’s like to play the market, as the company’s stock nosedived 21 percent Thursday after reporting a ballsy $2.2 billion loss the day before.

But there were some notable themes that emerged from the last few weeks of earnings releases and conference calls that provide a window — at least from the people investing in these companies — into the future of entertainment, tech and media. Here are three big ones:

1. Cord-cutting has clear winners and losers, and it’s not going anywhere

The migration from traditional pay-TV packages to internet-based skinny bundles is going to continue, and the big conglomerates are playing ball.

That includes Disney, whose sports colossus ESPN is the single biggest beneficiary of the existing pay-TV ecosystem since it charges providers more than $7 a month — easily the highest carriage fee of any network. Although the network has shed more than 12 million subscribers since 2011, ESPN is beamed into nearly 90 million homes. But those subscriber losses have taken a toll on Disney’s stock even as its film studio delivers record performance and its theme park business has thrived.

On Disney’s earnings call, Chairman and CEO Bob Iger called consumer response to internet TV services “encouraging,” predicting they’d continue to make up a larger part of the pie without cutting into the company’s profitability.

“From a per-sub[scriber] pricing standpoint, these new services are just as valuable to us as existing platforms,” Iger said.

During CBS’ earnings call, Chairman and CEO Les Moonves said the performance of its CBS All Access and Showtime streaming services has been ahead of expectations, and announced a new subscription service combining the two.

But as consumers move from larger collections to more exclusive packages, not all channels are going to make the cut.

Viacom has felt the effect of that, as its stock took a dip May 3 along with that of other media companies related to cord-cutting concerns, and fell 14 percent after releasing earnings. The company’s cable channels like MTV and Nickelodeon are finding a tough time getting into some of the new internet TV services like YouTube TV and Hulu. Sony’s PlayStation Vue also dropped Viacom’s channels late last year.

2. Window closed?

Theatrical windowing, the longstanding system where new releases are restricted to theaters for months before becoming available to home consumers, might soon look a little different, if the words of some leading media executives mean anything.

At February’s Code/Media conference, Fox film chief Stacey Snider said it was “anachronistic” that studios couldn’t sell their product for a determined period of time. Moonves appeared on a panel at the Milken Global Conference May 3 and said “the theatrical business is going to have to change its model.”

One solution many parties have discussed is some sort of premium video-on-demand model, where well-heeled customers who probably have pretty nice TVs at home can pay $50 or so to watch a new release from the comfort of their sofas.

But theater chains — who might have the most at stake as content producers explore alternative early-release home entertainment methods — aren’t going to accept a paradigm shift lying down.

On AMC Theatres parent AMC Entertainment’s first-quarter earnings call, CEO and President Adam Aron said the world’s largest theater chain has discussed premium video-on-demand with studios “to increase the pie for studios and for AMC itself.”

However, Aron reminded investors the company “has a backbone, and a firm one at that” and would take action to protect its shareholders rather than submit to a premium video-on-demand future that didn’t make economic sense for the cinema chain.

3. Everyone likes Facebook, but Snap’s cachet is disappearing fast

The biggest bust of earnings season came toward the end, when erstwhile tech darling and Snapchat parent Snap Inc. reported a $2.2 billion quarterly loss, which summarily sent its stock down as much as 25 percent in after-hours trading.

The company faces a triple threat: slowing growth, apparently mounting expenses and a dominant competitor in Facebook that is seemingly hell-bent on destroying Snapchat (Facebook’s Snapchat clone Instagram Stories has already surpassed 200 million daily active users, while Snapchat has 166 million). Analysts have set price targets for the company as low as $9 a share, barely more than half its $17 IPO price.

Meanwhile, a few hundred miles up the California coast, Facebook continues to roll along, impervious to its role in disseminating fictional nonsense news and even the unfortunate but probably inevitable reality of people killing themselves and others while broadcasting on its Facebook Live feature.

With its 1.3 billion daily active users, 45 percent operating margin and increasing share of the country’s advertising market — it took in $7.9 billion in ad revenue over the first three months of the year — Facebook seems impervious to criticism. Facebook’s stock actually dropped slightly after its earnings release, but recovered quickly and is up 30 percent year-to-date.

“We had a good start to 2017,” Facebook Founder and CEO Mark Zuckerberg said in an 18-word quote attached to the company’s earnings statement. As with all these companies, the numbers do the talking.

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