Morgan Stanley has warned that the profits and advertising revenue of traditional media companies will decline as streaming video and music providers become more popular. This in turn has implications for the valuation of print and broadcast media companies. Morgan Stanley also says the rising cost of sports broadcasting rights may be unsustainable as TV networks’ revenue declines. The firm expects 70% of Australian households to have access to a streaming service within five years. From The Australian:
The analysts said they expected the value of traditional media businesses to decline sharply and in some cases fall to zero, with the biggest risks facing Nine Entertainment Co, Seven West Media, Network Ten, Prime Media Southern Cross, WIN, HT&E and Nova, as well as subscription TV operators.
“Principally, we expect significantly less time to be spent watching live FTA (free-to-air) TV and listening to live FM radio and watching traditional cable/satellite payTV,” the analysts said.
“Thus, we believe profitability (and) returns will inevitably decline for both TV and radio”…
Morgan Stanley said around 40 per cent of households have at least one streaming service and this would rise to 70 per cent within five years.
According to recent estimates from Roy Morgan Research, Netflix had lifted its Australian subscriber base to 11.3 million households after a 25% annual surge in subscribers, with 14 million households using some form of pay TV service (up 11.8% year-on-year):
My wife and I would be lucky to watch one hour of free-to-air television a week, whereas my Children only watch ABC For Kids. Instead, we have subscribed to Netflix, Stan and YouTube Red, where we get all of our television entertainment from. The situation is similar for most of my friends, whereas my baby boomer parents and in-laws still watch the majority of content via free-to-air television.
As the number of millennials, Generation Z and whatever comes next increases, the shift away from free-to-air towards streaming will only intensify. This presents a similar threat to their business models as was experienced by print media after the rise of online.
