"Recipe Rehab," a new Saturday-morning show that ABC debuted
this month, has all the ingredients of a hit. In 30 minutes,
chefs take unhealthy favorites such as gooey macaroni and cheese,
or a burger-and-fries combo, and re-engineer them into healthy,
It also launched with an existing fan base.
A shorter version was already popular onGoogle 's (
) YouTube video sharing site. It's the first of Google's premium
offerings to make the leap to a traditional network show.
The deal, a milestone for the search giant trying to position
itself as a hothouse of high-quality programming, also
illustrates some of the massive shifts taking place in the media
Competition is pouring in from once-unlikely sources. In
addition to Google, traditional networks are up against tech
) with its iTunes song-and-video-download store and e-commerce
), which has its own streaming video service.
At the same time, networks are driving new sources of revenue
selling their programming to some of those competitors, including
the pioneer in the streaming-video field,Netflix (
Long term, this is a big problem, says Tony Wible, a Janney
Montgomery Scott analyst.
"They perpetuate this system of selling content to people that
are destroying their biggest asset, which is their advertising
business," Wible said.
He likens it to the movie studios' early days of selling DVDs
to Netflix or Redbox, the rental kiosk operator owned byCoinstar
). At first they welcomed the sales of a few extra discs. Now
they're fighting those companies over customers who might opt for
a cheap download or disc rental over buying the movie.
"It's now the TV executives' turn to learn that painful
lesson," Wible said.
Media Stocks Booming
In the meantime, the new revenue sources and resurgent
advertising dollars on the local level are driving a range of
media companies and sectors higher.
IBD's Media-Diversified industry group has 19 stocks,
including leaders such asScripps Networks (SNI), with a
top-possible IBD Composite Rating of 99. Scripps owns flagship
cable networks HGTV and Food Network, which each draw more than 1
million households a night.
The owner of ABC,Walt Disney (DIS) is No. 2 in the group, with
a Composite Rating of 92. Disney relies on a diversified business
model. It has a lock on many sports fans' dollars with its ESPN
channels, and wins families' cash with its theme park
Overall, that Diversified Media group was ranked No. 13 among
the 197 tracked as of Friday, up from 125 six months ago.
The Media--Radio/TV ranked No. 18, from 152 just six months
earlier. Its top name,Sinclair Broadcast (SBGI), has grown
through acquisitions and now owns or services 74 TV stations
including affiliates of Fox, ABC, CBS, CW and NBC.
While consumers are watching more shows on their own time --
using digital video recorders to fast-forward through
commercials, or streaming commercial-free versions of their
favorite shows, Americans still spend about 4-1/2 hours a day in
front of live TV, according to media tracker Nielsen.
And broadcasters are winning right now on a potent mix of
strong advertising around the London Olympics in August, massive
media buys ahead of November's elections and ongoing ad spending
by resurgent automakers.
"It's really a perfect storm for local television," said
Douglas Arthur, media analyst with Evercore Partners.
That sets up some tough comparisons in 2013. But some of those
same drivers could return in 2014, with a midterm election and
the Winter Olympics, he said.
Most surprisingly, perhaps, is the performance from IBD's
Media-Newspapers group, which suddenly no longer seems to fit the
stale joke of being black, white and red all over. The group is
ranked No. 17, up from 109 six months ago.
And while it doesn't have clear leaders,New York Times Co.
(NYT), with a Composite Rating of 95, is up more than 30% since
early August, on its strong push in digital subscriptions.
Gannett (GCI), publisher of USA Today and a slew of local
dailies, last week cited the Olympics and political advertising
for the 36% pop in revenue in its broadcast division. But its
publishing side also posted its first circulation revenue
increase since early 2007, as it erected more pay walls in front
of its papers' digital content.
Arthur says newspapers are getting "belated" respect from
investors for the tectonic shifts they've made away from relying
on fickle advertisers to pay the bills, toward getting readers to
pay for content.
The New York Times will post Q3 results on Oct. 25. But in its
second quarter, circulation revenue surged 8% companywide to
$233.3 million. That's approaching total advertising revenue,
which declined 6.8% in the quarter to $244.3 million.
At its flagship New York Times newspaper, circulation has
already topped advertising as the largest source of revenue.
Gannett, which had resisted that pay-wall model, has since
embraced it and has rolled it out at three-quarters of its
markets, and expects to complete the process by the end of the
"People want and find great value in our content and are
willing to pay for it," Gannett CEO Gracia Martore said in a call
Gannett has also found that satellite and cable companies are
willing to pay for network TV content.
Earlier this month the company reached a deal withDish Network
(DISH), averting a potential blackout on the satellite provider
of Gannett-owned ABC, CBS and NBC stations in 19 cities,
including Atlanta, Denver and Washington, D.C.
Gannett had sought more money to compensate for potential
backlash from advertisers because of Dish's Auto Hop feature,
which makes it easier to skip commercials.
Neither side disclosed the terms of the deal they signed, but
during the public spat, Dish said Gannett had wanted a 300% hike
Arthur says networks are increasingly demanding some of that
money from the station operators, like Gannett. But cable and
satellite companies can only pass so much of those rising costs
on to their consumers.
Cable Costs Run Amok
Wible points toComcast (CMCSA) (in IBD's Telecom
Services-Cable/Satellite group). Costs per subscriber have
climbed faster than revenue per subscriber, meaning the company
has eaten a large portion of the programming fee increases.
He said that current trajectory of networks and studios
demanding higher payments for their programming is unsustainable,
and ultimately will drive customers to streaming services, which
diminish networks' advertising strength.
"I think there's too much pressure on the consumer when your
cable bill is as much as a car payment," he said.
What could change that trajectory?
The government could step in with regulations affecting
programming pricing. Or powerful juggernauts could launch a new
service that changes the landscape, the way Apple helped reshape
the music industry with iTunes.
And then there's new technologies and startups.
One, Aereo, grabs free over-the-air broadcasts and delivers
them to subscribers' devices over the Internet. The startup is
backed by Internet conglomerateIAC/InterActiveCorp (IACI). TV
broadcasters have launched a legal broadside against the service,
joined by cable giantCablevision Systems (CVC).
Another young company, Boxee, has unveiled a $99 set-top box
that combines streaming apps, free over-the-air broadcasts and a
It's not entirely clear which services will survive the
inevitable challenges from the industry's heavyweights, or which
will be embraced by consumers.
"There's a lot of permutations in the way this stuff could
unfold," Wible said.