Media Companies Underperform, Era of Pay-Tv over?

Signs that pay TV’s pricy bundles of channels are starting to unravel finally took a toll on major media companies. Media stocks were hammered most of the week as Viacom’s underwhelming earnings gave investors another reason to sell, after industry bellwether Disney cut its profit outlook earlier this week on the back of more people cutting the cord on pay-TV packages. Even though, most analysts have known the fact that consumers love online video distributors like Netflix, Hulu and Amazon it’s the first time that signs of trouble for the traditional cable and satellite TV business have made investors and analysts sit up and take notice.

Disney’s stock has dropped by more than 11 percent since Tuesday when the company reported its earnings and cut its profit outlook for the year and was seen as a huge negative for the stock. Most media stocks dropped from anywhere between 10 – 21 percent over the week as traders and investors took into cognizance the impact that internet video distributors were having on media companies. Many analysts believe that the availability of internet connections along with the online media content providers producing fantastic content has led to consumers move away from traditional media houses which is being seen as a huge negative. Analysts believe that the media companies could continue to see consumers moving away from them until they become competitive in terms of pricing. Many analysts believe that investors are now talking about the death of pay TV even though the pace of declines are likely overstated by press and Street commentary.

Analysts on the street have turned bearish on traditional media companies and have a consensus sell rating on most companies which is being seen as a huge negative. Traders believe that prices of media company stocks could head lower in the near term.