Posted on 10/30/2008 7:18:40 AM PDT by My Favorite Headache
Big Media Coming Apart At The Seams by Diane Mermigas, Thursday, Oct 30, 2008 7:30 AM ET Despite the grim warnings, lower earnings and massive layoffs, it appears the worst is yet to come for big, lumbering media companies. It all rides on what we don't know. We don't know how deep or how long the advertiser and consumer spending pullback will be. There is no historical precedent, given the powerful unraveling of the global economy.
We don't know how much revenues and earnings will drop over the next year. Even online advertising growth is dwindling to single digits. We don't know how much of the P & L gap companies will move to fill by reducing more headcount, closing operations and attempting asset sales. We don't know how companies will shuffle their financing obligations to remain fluid and solvent.
We don't know how challenged business models will hold up under economic stress and a digital sea change. Advertisers may be unwilling or unable next spring to support the upfront model responsible for securing $9 billion in prime-time commitments. Local TV station and newspaper owners will not have community-based or election-related ad spending model to rely on in recession-wrought 2009. Newspapers' classified revenue backbone already has been broken.
What we do know is that the absence of reliable ROI media metrics will contribute to advertisers' meager spending. Many of the major advertiser categories, such as automotive and financials, have been permanently decimated. When they resume regular ad spending, there will be fewer advertisers spending far lesser amounts. Other categories, like retail, will remain flat for the next 18 months. Many big and small advertising companies will merge or disappear. Traditional ad spending at prior levels is not coming back, although money will continue to shift to new digital platforms.
What we do know is that consumers will continue to become more fragmented in their attention and loyalties. They will take refuge in their social networks, where they can commiserate with friends. Traditional media consumer support (watching scheduled TV, attending movie premieres, buying books in stores) will continue to wane, but their attention and spending in all places digital will prevail.
What we do know is there will be no federally funded bail for media, Internet, entertainment and advertising. Big media by definition is not nimble and innovative enough to simply dump what's not working, modify what can be saved, and grow what works.
There isn't much that big media companies can bank on or reliably forecast moving into 2009. They are hamstrung between deteriorating traditional costs and revenues and evolving digital business models that do not offset the losses, generating less than 10% of their overall incomes. Big media isn't just being ravaged by recession; it is being sacked by a technological transformation of enormous proportions.
You only need to look at General Electric, parent of NBC Universal, to understand how dramatic and unpredictable the changes will be. The stock market's 300-point reversal to the negative in the last five minutes of trading Wednesday was partly attributed to erroneous reports that GE might face worse than it has forecasted: flat earnings on a 10% to 15% revenue decline in 2009. That level of skittishness has many wondering whether NBCU's recently announced $500 million in cost cuts are just the beginning.
The vast layoffs occurring across all media sectors are a predictable knee-jerk response to cutting losses. What really is needed is bold restructuring and reinventing, and even elimination of Big Media's overgrown, inefficient legacy structures, along the lines of what Ann Moore just announced at Time Inc. The publishing company isn't just cutting 600 employees; it is radically restructuring its resources and workforce across its branded titles. The result has to mean generating more permanent cost savings and increasing what falls to the bottom line. Time Inc. operating income fell 15% to $218 million on a 6% decline in revenues to $1.2 billion in the second quarter.
It's called blowing up the status quo, and it will have to occur at more media companies. As U.S. consumers and advertisers strengthen their digital adoption spending, many large, old-line media companies (and even some newer players) will have no choice.
What we don't know is how many more big media companies are considering such radical, but necessary, moves. Fourth-quarter earnings are not expected to be bolstered by anemic holiday season spending; the normally weak first quarter of the new calendar year could be disastrous. More immediate considerations as big-media reports third-quarter earnings:
How can CBS (considered the most at risk with 70% of revenues tied to advertising) avoid structural change in its core television, radio and outdoor businesses? With local television earnings expected to decline 13% in this election year, where will its owned-and-operated outlets run for cover in 2009?
How will Viacom and CBS eventually be impacted by the credit crisis-provoked loan covenant woes of controlling chairman Sumner Redstone and his private holding company, National Amusements? As Pali Capital analyst Richard Greenfield points out, it has yet to publicly detail its debt to leverage and renegotiated financing arrangements.
How can News Corp. avoid the double whammy of steep double-digit declines and high legacy costs from its newspaper and television businesses? With print assets accounting for one-quarter of its earnings, will it respond with some of its classic business model innovation?
How much will Walt Disney Co. be compromised in a difficult economy by declining consumer spending at its theme parks, products and entertainment businesses?
What are the content assets of a streamlined Time Warner really worth when they are revaluated?
With digital revenues comprising less than 10% of companies' overall revenues and doing little to ameliorate the cannibalization from time-shifting technology like DVDs and pure-play Internet filters like Google and Amazon, how will entertainment conglomerates respond to what Credit Suisse analyst Spencer Wang calls "an uphill battle?"
After this election, I predict that most citizens will stop listening to the major media outlets — as it will be apparent that they TRIED (but failed) to affect the election, that they did everything they COULD to get Obama elected.
The end result will be, I predict, that no one will believe them EVER AGAIN.
I’m already thinking about those associations and organization to whom I will turn for insight and information.
Certainly not ABC, CBS, NBC, FOX, WSJ, AP, Rueters, Houston Chronicle, etc.
Dems will want ownership in these companies.
I am sure that they will all go to the government for a handout so they can stay in business and have a government representative as a stockholder.
This would be an Obama world solution!
Boycott MSM advertisers and help them out of their misery and ours.
Anyone know who advertises in the LA Times and NY Times. They should be first on our list to boycott!
Gays taking over Disneyland, nightly news “if it bleeds it leads” at supper time no less, newspapers total loss of objectivity and fairness in political reporting, MSM’s anti-christian prejudice etc are driving consumers of their products away in droves to alternative media like- well Freerepublic.
Here’s another one: The Christian Science Monitor just announced it’s going to online-only during the week with a print magazine format on weekends.
“Wave of the future...”
be nice is everyone on here would never click on their websites, never turn their channels on
MSNBC,NBC are banned in my house and I try to get others too.
I never click on the NY times or the LA times
why should I if I wanted to hear obama’s crap I would just go on his website
the media are dead or most of them now anyway
my only wish is that i hope to meet some of these amateur journo’s in person so I can view my views to them face to face
there’s a lot of people angry at them and it will not stop after this election
I will never forgive them how they have acted in this election
if any of you idiot journo’s are out there then don’t be surprised when you are confronted in the future you brought it on your self
Pic of "Media coming apart at the seams".
For all of their elite intelligence, it seems as if the MSM organizations will be cutting off their noses to spite their faces. IF they’re successful in getting Obama elected, it’s going to become even tougher for them them to remain commercially viable.
1. With the increase in corporate taxation promised by an Obama administration, there are going to be fewer funds for flexible spending such as advertising. Additionally, as the Democrats have long promised, the minimum wage is going to increase dramatically, so again, fewer advertising funds.
2. People will begin to look back on this election as a time that the media lost all pretense to objectivity and will view them as the propaganda tools that they are.
3. Once the election is over, all of those political advertisements will go away. If the media outlets are struggling now, how will they fair once that influx of money is gone. Additionally, since the election is over, people will be less interested in the media and therefore, they’ll have even less attention.
Odd that the MSM is so blind to the concept of unintended consequences.
Cable, and the major networks have altered my viewing habits. On our system the major networks are within the first 13 channels. I seldom watch channels 2-13. I watch local morning news on Fox, 9, and sporting events. That’s about it, the rest of my viewing is done 30 and above.
I think it’s a crying shame that our country has become so dependent on Wall Street to determine how successful our economy is. Those day traders are only out to make a quick buck, but just because they all bail at the same time is not a real indicator of how our ‘true’ economy is doing.
Anyone who has taken economics understands that our economy cannot always stay on the top forever. There will come a time when we no longer need to buy a new car or new house or new-whatever and the economy will slow. That means a swing back in the other direction. But, as soon as we need a new car or new house or new-whatever and the economy will swing back toward the top again.
This is all a scare tactic so that they can get the government to do what they want. We’re now hearing that Congress is talking about helping out bad management in the Auto industry. And, who’s running Congress? Dems, that’s who.
Come on people! Put a stop to this nightmare!
For what they have done in this election, their businesses deserve to die. We may well end up having a government newspaper run out of some office at the University of Illinois at Chicago. It will be our version of PRAVDA. Does anyone think Obama would not be capable of doing that?
Things have got to look bad for the media right now, not only are we looking at a recession economy where advertising spending goes down from retailers, but there won't be Barry's megabucks spent on them next year. I'm looking forward to the types of collapse in the media that we've seen this year on Wall Street.
Fire everyone.
Hire people who will quit pumping a political agenda (especially a LIBERAL one).
Middle America, mom and pop with the 2.n kids is sick of being bombarded with "gayness" at every turn, (Not in their life paradigm), is tired of being told all they believe in and work for is evil and wrong, and is sick of the incessant LIES coming out of the tube.
Where are they? The tube is on sports, the kids' channels, History/Nat Geo/Military/Discovery channel, or on a movie.
The media have done this to themselves.
Print just gives you the opportunity to go back and seeBS, and newspapers laden with too much crap to line your bird cage just don't cut it.
Gosh. Maybe truth will sell, or at least unbiased reporting of events with the opinions left on the editorial page.
In the meaantime, the death spiral continues because they just don't get it.
So true!! Who needs the NY Times when you have barackobama.com?
If Obama wins all of big media’s problems are over.
We already have a media that acts like a state controlled propaganda machine. Might as well make it official.
News carriers in the MSM have shown us they are not operating in the interest of information dissemination - they remind me of the horribly huge old gas guzzlers we used to accept as autos.
Maybe we as a nation are getting more cautious about what we are delivered for our earned dollars.
The print media is a dinosaur in the world of advertising other than local news delivery to communities, television is still viable if they stick to entertainment programming (even with the liberal messages tucked into them), and radio seems to be surviving regardless of the rules.
The best alternative for reliable information is through the internet as it is now - if only we can keep it free of encumbrance by government meddling and influence.
"Time Inc, the world's largest magazine company, is planning a restructuring that could lead to hundreds of job cuts"
{snip}
"It is understood that between 300 to 600 job cuts could be made. "
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