Wall Street: All About OTT, And Ignoring TV?


MIAMI BEACH, FLA. — If there was one key takeaway from a Tuesday morning NATPE 2019 panel session with the title “How Wall Street Watches TV,” it was this: Does Wall Street watch television … or is it in lock-step with Madison Ave. millennials who have gone over-the-top on OTT and the ever-growing “D2C” manner in which video content is being delivered and consumed by U.S. households?

Nary a word about broadcast television, and what three top financial investment advisory firms think of the business, was spoken until RBR+TVBR queried a who’s who of Wall Street wizards.

With Lionsgate Entertainment SVP/Head of Investor Relations James Marsh serving as moderator — and fueling the OTT focus — RBC Capital Markets Senior Analyst Steven Cahall was the first of the panelists to share with NATPE 2019 attendees why digital OTT players are driving interest from both consumers and from Wall Street.

For Cahall, spending on content is a big differentiator. Some $107 billion was spent on content on an overall basis, when combining traditional TV with the digital entities. Of that, some $80 billion was spent on original content.

But, just what companies were driving this spending? Disney, Netflix, Amazon, AT&T and Comcast were the top five.

This has led to a convergence that sees digital players starting to behave more like traditional media, and vice versa — creating a value proposition that levels out digital and legacy in the minds of many in New York.

For Amazon, Netflix and other Silicon Valley invaders of Hollywood, the impact of free-wheeling spending has been obvious for months. In early June, outdoor advertising across central Los Angeles was nearly exclusively for programs on Netflix, Amazon Video or HULU.

Cahall points to this spending, some $12 billion annually, and looks at how their $12 monthly subscription is the chief revenue source. “That’s the disruption,” he says. “It is great for consumers but tough for companies built on a traditional business model.”

It is why Cahall strongly believes that, when the dust settles, for chief video content distributors will be left: Disney, Apple, Amazon and Netflix.

That’s a scary proposition for broadcast TV, especially as ATSC 3.0 — the next-gen broadcast TV standard — has been heralded as a game-changer for over-the-air stations and a potential death knell for cable TV channels and traditional MVPDs.

With Amy Yong, an analyst at Macquarie Group, openly questioning the long-term viability of cable in a digital, hand-held world, she also wonders if there’s too much OTT out there for the world to consume. “Everybody and their mom is in OTT,” she says. “How do you monetize it? Who survives?”

Meanwhile, JPMorgan Chase Managing Director Alexia Quadrani wonders if the OTT giants will someday be forced to incorporate advertising — perhaps taking a model used today by Spotify and Pandora, which sees limited advertising on free versions and ad-free versions for a paid subscription.

Then came comments from Michael Nathanson, a Senior Research Analyst at MoffettNathanson LLC. He reacted to research provided by Lionsgate’s Marsh showing that nearly 60% of those surveyed believe traditional media companies should protect their businesses by selling them outright — and getting out while they still can.

Otherwise, consolidation is the only answer to the continued viability of traditional TV.

Who could be in play? Nathanson doubled down on his prediction that a CBS Corporation merger with Viacom “is inevitable this year.”

At the same time, Nathanson calls The E.W. Scripps Co. “a motivated seller.”

This was the lone discussion of television that didn’t involve a Netflix or OTT, or perhaps Disney+, which is getting buzz.

As such, RBR+TVBR quizzed the panelists at the end of the session on what they felt about the future of broadcast TV, given the technological advancements at its fingertips.

Answering the question was Quadrani, of JPMorgan Chase. She pointed to live news and sports as the best reason one would want to invest in broadcast TV.

“Broadcast is still a very strong business model — at least in the intermediate term,” she says. “If you are a local affiliate station group with access to the NFL, you are still very valuable.”

For Cahall, “modest cash flow” begs the question as to who owns and controls the content. If a broadcast TV company creates and distributes the content, rather than simply delivering something it doesn’t own, the value proposition decreases.

“What if NFL rights end up on Facebook in 2023?” he asks.

For now, that’s a problem no one need to ponder for four years. Yet, as the panel concluded, it raised further questions about broadcast television’s future, and whether Wall Street has given up on the original way homes received video content for newer, digital alternatives.