U.S. Media Industry In Trouble: 4 Stocks To Steer Clear Of
Zacks Investment Research | Sep 08, 2016 10:35PM ET
The U.S. media and entertainment industry has long been grappling with declining advertising revenues and global economic volatility. The rising popularity of online sites over print media has also dealt a heavy blow to the industry, making the print-advertising model increasingly irrelevant. Cord cutting by TV viewers is also on the rise.
The media and entertainment industry is one of the rapidly changing areas in the economy. Massive technical changes in content creation, aggregation and distribution platforms have rendered the traditional business model unprofitable. Starting from interactive gaming, films, broadcast TV, print and publishing to live entertainment, social media, digital advertising; the media industry is evolving in a completely new way. These changes have made the survival of the incumbent media behemoths highly challenging.
Advertising remains a significant source of revenue for the media industry that in turn depends on the health of the economy. Advertising volumes are currently under pressure as advertisers refrain from making upfront commitments in an economy under recovery.
Spending on media continues to shift from traditional to digital products and services at an overwhelming pace. In general, digital advertising rates are comparatively lower than advertising rates in traditional media. As a result, advertisers can maintain or expand their reach through digital media by spending a portion of their budget. The growing adoption of digital media as the advertising platform has impeded advertising revenue growth in the traditional media companies.
The cable TV industry in the U.S. is highly matured and saturated. Most of the large media companies’ flagship cable channels are already distributed and therefore, chances of higher revenues are limited. In addition, the media industry is categorised as an intensely competitive one.
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Within the Zacks Industry classification, the Media Conglomerates industry is part of the Consumer Discretionary sector, which is one of 16 Zacks sectors. We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: Zacks Investment Research
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