Something strange has happened lately in the media world.
A lot of the so-called dinosaurs of the old media world—CBS Corporation (CBS), Disney (DIS), and Comcast (CMCSA) had strong growth figures, more than offsetting the whole dollar declines at Fox (FOXA), Time Warner (TWX), and Viacom (VIA). But we’ve heard for a long time that cord cutting is killing the cable companies, and Millennials don’t watch T.V. so the broadcasters will suffer too. We also have been warned that piracy will kill box office revenues, fragmented media consumption will kill the mainstream, and YouTube, Facebook, and Netflix are going to take everyone’s attention away from the old small screen.
Looking at last quarter’s revenue figures, we see a very different story. Facebook is doing great, Google is doing even better; we see strong growth at Netflix (NFLX) as well, but in hard-dollar terms CBS, CMCSA, and DIS are actually taking more new money than Netflix and almost as much as FB:
Perhaps the most eye-catching thing about this charge is the year-over-year growth at Facebook, which is substantially larger than any other company. But it’s important to remember the concept of the law of large numbers. For finance, this means the larger the numbers, the harder it is to grow those numbers on a year-over-year basis.
For this reason, there are several companies whose total dollar growth was actually much better than Facebook’s. While FB grew its revs by $1.99B, DIS grew it by almost that much and CMCSA wasn’t far behind. Google grew its revs by a lot more than $2B in the quarter, making it the most impressive winner in terms of grabbing more dollars.
But Google’s growth is broad based, whereas much of the growth at CBS, CMCSA, and DIS is domestic. Facebook, similarly, depends on the rest of the world for some of its growth, but since the company breaks out its revenues by geographical area in its 10-Q and 10-K filings, we know that its growth rate in America is actually very high. So it isn’t just depending on the emerging markets for growth.
Where, then, is all of this growth coming from?
This is a complex but important question to answer, and it involves really understanding where the money going into these companies is coming from. Most people don’t realize it or think of it this way, but advertising companies are really business-to-business firms, so understanding the demand for their products means understanding the businesses they cater to. There is something interesting happening in the media world causing broad demand on both digital and television in the U.S. Those who understand the trends behind this are likely to benefit in the long run.