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?"
http://www.freerepublic.com/focus/f-news/2119483/posts
CBS falls to $12.46B 3Q loss (Dinosaur Media DeathWatch™)
Bye bye axels, see you on the breadline
Whaaa? Dems already own the MSM lock, stock, and barrel.
“What goes around comes around.”
“The higher you rise, the harder you fall.”
My favorite: “Paybacks are a bitch.”
“dems already own the msm lock, stock and barrel.”
corrections: dems ARE the msm and the msm are dems.
(and dems and msm are interchangeable scu&bags.)
Big Media Coming Apart At The Seams
Dems will want ownership in these companies.
Big media makes big bucks a year out before elections.
The money spent this year (and lasst year) was obscene.
Obama could have opened a new school and a health clinic in South Chicago for what he has spent extolling himself to the public.
George Will said it was less than what Americans spend on potato chips a year.So he doesn’t consider that what has been spent is wasteful or corrupting.
However, those dollars are divided by 300 million Americans.
The media decided who won the primaries. I recall some MSM news channel said they couldn’t cover all the candidates because they didn’t have the staff. So we never saw them again on equal footing especially those who didn’t have much name recognition or publicity and advertising $$$.
So much for citizen legislators.
Follow the money. Where it comes from and where it goes.
The majority goes to big media.
It isn’t only that some politicians become corrupted for having to raise these obscene dollars to run for office, its big media as well that is corrupt because they get the advertising dollars.
Just imagine it took an ordinary guy, Joe the Plumber, (not our schooled journalists) to “plumb” to get Obama’s philosophy and intention “to redistribute wealth” out on the table.
Although I am real happy there was a network and a photographer there to capture the moment and get it out to us potato chip lovers.
It is amazing to me that in the last week of a 19 month campaign that Obama felt the need to explain himself one more time to us in his wasteful infomercial.
And all he strives for is to create the perception that he looks presidential because of his Hollywood Oval Office background set.Truth is hidden and we are manipulated.
Obama has the nerve to spend these amounts of monies on himself while wanting to take Joe’s and our incomes and spend it wherever he wants.
If he cares so much about the poor and the middle class in these crisis economic times, why is he still asking and raising money?
I wonder how many health clinics and new jobs he could have created for South Chicago with this money.
NO government ownership or interest in our print, broadcast, cable or internet media can be allowed. Ever.
And de-fund CPB/PBS/NPR.
.
Yes, Doug, all the msm will be Pravda. And you remember how much credibility Pravda had with the Russian people? They knew better. Most readers of Pravda mastered the art of “reading between the lines” and got to the truth of the story based on how the story was presented. Only the most gullible actually believed literal print of Pravda.
The irony is that back in the 1960’s, Russians considered the NYSlimes to be the paragon of truth!
It couldn’t happen to a more deserving bunch of people.
I don’t know what part of it the MSM doesn’t get.. but when they behave like “Air America”, they will suffer the same fate.
It's too bad that conservative companies could not pick them up at a bargain price and turn them into a profitable enterprise. Imagine CNS News, WorlNetDaily or NewsMax as a replacement. Really "true" fair & balanced with both sides, nothing hidden or surpressed or manipulated. The very opposite of propaganda in nobody's tank.
Ah, one can dream... just like for the FAIR TAX or cutting the size of government to it's original intent, or school choice, or privatization of most everything... WAKE UP YOU DAYDREAMER! Oh alright {:+0
Perhaps they are betting on the Rats taxing the cr@p out of the internet, shifting advantage back their way?
Yep.
I do not watch or read any of these any longer. I get my news off the Internet from sites like FR, CNSNews, etc. I refuse to give these people positive ratings. If they all fail and every one there is fired, I could not care one darn bit.
They're going to need to "get it" or they will blame their demise on something else. The MSM needs to hear from its audience how completely disgusted we are with their lies, bias and coverups. As do their advertisers. They must be repudiated-strongly and swiftly.
I wouldn't be so sure of this. If Obama is elected, it would not surprise me if the nationalization of some of the media is floated. As in, "We can't let these American institutions die. What would this country be without the NYT or WP?"
Read an article from a journalist yesterday that said the reason that their editors are in the tank for Obama is they think he will rescue them financially.
Interesting. Was it a direct bailout, like the one we’ve just seen for Wall Street? Or would it be some sort of set of tax breaks?
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