Cord cutters helped cost big Hollywood studios up to $60 billion over the course of three days last week. What once analysts thought was just a niche group has big mutual fund companies worried a new lifestyle of entertainment is settling in. It has left some mutual fund companies pleading for companies like Disney and Fox to make changes.
Walt Disney showed a slight increase in earnings per share last week. However, the House of Mouse failed when it came to revenue expectations. Part of the downturn in revenue stemmed from profits they had expected to make in cable television growth, according to Bloomberg. Last year was the first time cable failed to increase its subscriber base. Cord cutters have continued the trend in 2015. This prompted Walt Disney to cut its forecast for profits in the cable industry.
Shares of Disney initially fell 8.4 percent, but Disney wasn’t the only casualty of cord cutters. The following day, Viacom echoed Disney’s sentiments saying that it’s ad revenues had fallen 9 percent at its networks like MTV, Nickelodeon, and Comedy Central. This really seemed to send investors into a tizzy. They were calling for two of the leading entertainment providers to change the way they were doing things.
Todd Juenger of Sanford C. Bernstein called for a complete overhaul of the way these entertainment companies are treating their content, according to a Hollywood Reporter post.
“No one wants to get back involved until they find a bottom.”
“TV networks essentially outsourced the on-demand viewing business to the SVODs, starting with Netflix. At all costs, you must protect affiliate fees and the bundle. Please take back all the on-demand rights to your content and make on-demand access freely and easily available to pay TV subscribers as a privilege of their pay TV subscriptions. Signal what you are doing, and why, clearly to all your peers.”
Despite Juenger’s plea, Disney CEO Bob Iger looked at opening up things for more cord cutters in the near future. It was suggested by Iger at Star Wars Celebration this past year that there may be a day a Star Wars Channel might exist. He echoed those comments on August 4. This time the ESPN family of networks was the talk of a separate channel.
A decision like that could cause the end of cable as we know it according to Richard Greenfield of BTIG.
“At worst, he is actually ready to pull the final linchpin holding the cable bundle together, thereby accelerating global thermonuclear war leading to a dramatic drop in ESPN’s profitability and likely the profitability of everyone else associated with the multichannel ecosystem.”
Currently, about $6.55 of current packages cable and satellite bills go to ESPN. WWE Network has shown that even in a niche market like professional wrestling, cord cutters will pay for specific services.
What are you thoughts about cord cutters? Are you one yourself? Do you see a future without cable television providers? Is a la carte the way to go?
[Photo by World Soccer Talk]