People pass by a closed movie theater on April 09, 2020 in New York City.
Photograph by Angela Weiss/AFP/Getty ImagesRich Greenfield describes himself as “cautious, to say the least” on traditional media companies during the pandemic, and beyond.
Barron’s spoke with him recently about theme parks, movies, television and streaming. His edited comments follow.
On the outlook for traditional media companies:
This is sort of the perfect storm for traditional media. Basically everything that could go wrong has gone wrong all at once. And the after effects in terms of a weakened economy could take years to turn around. There’s no getting around it at all. I think anything in the traditional media universe is tough to own right now.
On television:
The biggest reason to pay for multichannel television is sports, and sports are not being played right now. TV is running out of new content because their production engines are all shut down. I’ll say it on the record: I do not believe there’s going to be a fall TV season for the first time ever. There may be some reality shows that are able to ramp up, but I would expect there to be essentially no scripted television. That’s going to hurt from a rating standpoint and therefore an advertising standpoint
On movies:
Let’s just say the world reopened sometime over the summer. If you don’t want to go to a packed, 200-seat movie theater where it’s body-to-body, and you’re literally sitting two inches from the person next to you—if that’s not going to be socially acceptable, the movie studios may have to do something drastic and rethink their business model. Whether that’s selling movies at $20 a pop directly to your home, or whether it’s like movies on Netflix (ticker: NFLX) that are included with your subscription.
Movie exhibitors that are highly levered were already probably going into bankruptcy over the next couple of years. This could be a straw that just breaks them.
On theme parks:
On an average day, 155,000 people go to Disney World. How do you have a parade, and how do you go on the Buzz Lightyear ride, if you’re not standing next to someone? The lines for Disney attractions run one to two hours. How do you run lines for rides if you’re not supposed to be right next to someone? All of this is very hard to fathom. That’s a business that sounds like it could be impacted for quite a long time. Businesses like the film business can pivot to other business models. Theme parks can’t pivot.
On weathering the downturn:
The reality is most of the traditional media companies are big enough to survive. When you think about these big companies, Walt Disney (DIS) has consolidated most of Fox (FOXA), and Comcast (CMSCA) has consolidated NBC and now Sky, and AT&T (T) has done WarnerMedia and DirecTV. In many ways the scale and consolidation is going to help these large companies. They are going to survive and, I wouldn’t say flourish, but they will certainly do better. The pure stand-alones that are left are really going to struggle. Think about smaller companies like Lions Gate Entertainment (LGF) and AMC Networks (AMCX).
On Comcast:
For Comcast, I wouldn’t say the crisis is a positive, but the reality is that broadband has become that much more important. People are spending more time on broadband. They’re upgrading their broadband speeds. The video business has been largely dying for years [but the pandemic] might slow the cord-cutting trends just because people don’t want anyone coming to their house right now. There’s no doubt that the NBC parts of the business are going to be under pressure. The good news is the majority of the company is its cable business. No one has ever bought Comcast for NBC.
On Netflix:
Here you’ve got a company where we’re all stuck at home and watching more video. And the cost to produce content is going down because everything is shut down. So Netflix is in this unique situation where revenues are probably going up and costs are coming down. That’s an example to us of a company that is really well positioned during this.
Write to Jack Hough at jack.hough@barrons.com. Follow him on Twitter here and subscribe to his podcast here.
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April 11, 2020 at 08:00PM
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‘This Is the Perfect Storm for Traditional Media,’ Analyst Says - Barron's
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