Media analysts Michael Nanthanson with boutique research house Moffett Nathanson today writes that big media companies such as Walt Disney (DIS) and CBS (CBS) are finally moving to “Plan B,” their attempt to adjust to “over-the-top” streaming video with their own offerings of “skinny bundles.”
Overall, it’s “hard to imagine that media owners come out better in the future versus where they are today,” concludes Nathanson, though the result of Plan B will probably be “a clear dichotomy of ‘haves’ and ‘have nots,’ based on the strength of the content offering and the relative cloud of each negotiating hand.”
He has a Buy rating on Disney and on Twenty-First Century Fox (FOX), and Neutral ratings on CBS, Scripps (SNI), Time Warner (TWX), and Viacom (VIAB), and a Sell rating on AMC (AMC) and Discovery (DISCA).
takes his cue from Disney’s decision last week to break with Netflix (NFLX) and introduce a direct-to-consumer ESPN offering.
He notes that CBS has said its “All Access” offering is “well ahead of plan,” and that AMC and Fox have talked about “creating premium, commercial free AMC and FX channels, respectively, with current and full back library content rights.”
The big picture, he writes, is that “media companies must be able to adapt their prior models to make them more customer-friendly.”
“The old ways of every company winning simply because they make it into a bloated channel line-up, riding over exclusive pipes in every U.S. household, are over.”
The era of haves and have nots, writes Nathanson, is all about pricing power. “As technology increases the pathways that content can be distributed to a house, those networks that own programming critical to either customer acquisition or fighting customer churn have pricing power,” he concludes. The winners like Fox and NBC-Universal “own many of the leading news and sports assets in cable.”
Those more-powerful media names are supporting new streaming packages “in an attempt to tilt the balance of power in their direction while putting pressure on the weaker cable networks that have been ‘free riders’ on the system.”
As a result, “we expect continued pressure on Viacom, AMC Networks and newly formed Discovery/SNI.”