April 6, 2020 BARRON’S 17
of Covid-19.” Traffic isn’t an issue—
Facebook has seen record use almost
every day, but it isn’t monetizing much
of the growth on platforms like Mes-
senger and WhatsApp.
Twitter has been more specific and
could serve as a guidepost for everyone
else. After originally forecasting first-
quarter revenue of $825 million to $
million, or growth of 10.5% year over
year, the company now sees revenue
being “down slightly.” Like Facebook,
Twitter has seen a spike in traffic, but
the extra traffic is doing nothing to
help revenue.
If we assume that Twitter suffered
its entire revenue miss in the month of
March, that would suggest ad volumes
at Twitter are running close to 30%
below what they were before the virus,
not far off the numbers in IAB’s report.
The comments from Twitter and
Facebook indicate that Alphabet, Snap
(SNAP), and Pinterest (PINS) will face
similar issues. The vanishing market
for local advertising is a particular
problem for Yelp (YELP), the online
recommendation engine.
Shares of Facebook and Alphabet
have held up better than much of the
ad-supported industry. As Barron’s
wrote in a recent Tech Trader column,
both companies have piles of cash and
little debt. They aren’t insulated from
the downturn, but the businesses will
survive in the coming months, and will
be in a strong position to thrive when
conditions normalize.
Basic Cable
There’s a triple-whammy of issues for
ad-supported broadcast and cable net-
works such as those owned by AMC
Networks (AMCX), whose shares are
down 40% from the market’s peak;
ViacomCBS (VIAC), down 64%; and
Discovery (DISCA), down 39%. As
noted, advertising dollars are drying
up, viewership of subscription services
is spiking, and the lack of sports pro-
gramming could set the stage for an
acceleration in the long-running cord-
cutting trend.
The Giants
The largest U.S. media businesses—
Comcast (CMCSA), AT&T (T), and
Walt Disney (DIS)—have actually held
up better than most other ad-depen-
dent businesses. All three are likely to
survive the crisis more or less intact,
but there are trouble spots. The three
media giants have basic cable networks
that will be hurt as advertisers slash
budgets. AT&T, which owns TBS and
TNT, and Disney, which owns ESPN,
are struggling without professional and
collegiate sports. Comcast, with Pea-
cock, and AT&T, with HBO Max, are
readying the launch of new streaming
services under far different circum-
stances than they had imagined. Com-
cast, in particular, was counting on its
2020 Olympics broadcast to serve as a
springboard for the Peacock launch.
Meanwhile, Comcast, parent of NBC-
Universal, and Disney are stuck with
shuttered theme parks that could stay
closed for months, meaning zero reve-
nue despite ongoing costs.
But Comcast and AT&T have a
crown jewel: massive broadband net-
works, which have become lifelines for
the country’s homebound population.
And Disney has one of the world’s best
brands. A quarantine should also be a
boon for the company’s new Disney+
streaming service. AT&T’s shares,
down 25%, are buoyed by the stock’s
better-than-7% dividend yield, al-
though the company has suspended its
aggressive stock-buyback plan.
Newspapers
The falloff in advertising adds new
pressure to the beleaguered newspa-
per group. Shares of the New York
Times (NYT) have tumbled 27% in
the latest slide, which makes it the
strongest performer of the print media
stocks. News Corp (NWSA)—owner
of Dow Jones, the publisher of Bar-
ron’s and The Wall Street Journal—is
down 43%, magazine publisher Mer-
edith (MDP) is off 66%, and Gannett
(GCI), which has announced job cuts
at more than 100 newspapers across
the country, is down 85%.
Radio and TV Stations
The sudden disappearance of com-
mutes is a problem for the already-
troubled radio sector. Shares of
iHeart Media (IHRT), which re-
cently returned to the public market
after emerging from bankruptcy, are
down 69% from the market’s peak.
Cumulus Media (CMLS), which
owns the sports-programming busi-
ness Westwood One, is also off 69%.
Outdoor
Billboards are built for a steady
stream of drivers on the roads, an-
other model that has been decimated
by the suspension of commutes. Both
Clear Channel Outdoor Holdings
(CCO), off 77%, and Outfront Media
(OUT), down 65%, have pulled their
guidance and taken steps to cut costs
and shore up their balance sheets.
Avoiding Ads Altogether
The best performing stocks in the
media universe, not surprisingly, are
those with no significant exposure to
ads. Netflix (NFLX) is down just 4%
from the February peak. The com-
pany has never sold advertising, and
it is likely to emerge from the crisis
with more subscribers.
Pure-play broadband providers
like Charter Communications
(CHTR) and Altice USA (ATUS)
could also be winners. And the ar-
rival this year of new gaming con-
soles—the PlayStation 5 from Sony
(SNE) and Xbox Series X from Mi-
crosoft (MSFT)—comes at an oppor-
tune time, with many people proba-
bly still stuck at home and hungry
for entertainment.
“This will be a defining moment in
how consumers spend their time
with media, and what technologies
they use,” says eMarketer analyst
Jasmine Enberg. “And some of those
changes will be long-lasting.”B
Media Meltdown
Shares of ad-supported businesses have suffered deep losses, with the average decline for the group
nearly twice as large as the broader market.Company /Ticker Category 4/2 Closing Price % Change from 2/AT&T /T Diversified $28.76 -25.2%
Comcast /CMCSA Diversified 34.37 -25.
Alphabet /GOOGL Digital 1,117.03 -26.
New York Times /NYT Print 28.94 -27.
Facebook /FB Digital 158.19 -27.
Walt Disney /DIS Diversified 96.97 -31.
Omnicom /OMC Ad Agency 52.11 -33.
Snap /SNAP Digital 11.27 -34.
Sirius XM /SIRI Radio/TV 4.75 -34.
Roku /ROKU Digital 82.43 -34.
Discovery /DISCA Radio/TV 18.68 -38.
AMC Networks /AMCX Radio/TV 22.31 -40.
Twitter /TWTR Digital 23.02 -40.
Pinterest /PINS Digital 13.7 -41.
Interpublic Group /IPG Ad Agency 14.37 -42.
News Corp /NWSA Print 8.20 -43.
Trade Desk /TTD Ad Agency 164.78 -47.
Yelp /YELP Digital 17.65 -48.
WPP /WPP Ad Agency 31.49 -50.
ViacomCBS /VIAC Radio/TV 12.76 -64.
Outfront Media /OUT Billboards 10.69 -65.
Meredith /MDP Print 10.81 -66.
Cumulus Media /CMLS Radio/TV 4.44 -68.
iHeart Media / IHRT Radio/TV 5.50 -69.
Clear Channel Outdoor /CCO Billboards 0.62 -76.
Gannett /GCI Print 0.97 -85.
Avg Decline -45.
S&P 500 2,526.90 -25.4%
Source: FactSet