Like a far-off asteroid inexorably hurtling toward Planet Earth, the coming digital explosion has the traditional media conglomerates bracing for eventual impact and desperately seeking survival strategies—such as the recent announcement that Comcast subsidiary NBC Universal is launching strategic partnerships and investing $200 million in each of two prominent online upstarts, BuzzFeed and Vox Media.
Aside from Comcast, the media companies scrambling to escape disaster and crack the digital code include Rupert Murdoch’s 21st Century Fox empire (which comprises Fox studios, the Fox broadcast network, and the FX, National Geographic, and Fox News cable channels), Time Warner (Warner Bros., CNN, HBO and the various Turner channels), and the Walt Disney Co. (Disney studios, ABC, and ESPN).
But at least one media behemoth—Viacom, which has absorbed painful blows on Wall Street and in the press for a widely perceived failure to embrace the creative and technological challenges presented by a disruptive new reality—might be facing Armageddon, according to several industry insiders.
“I don’t think Viacom will exist in 10 years,” predicted a top media executive who, like several other industry leaders interviewed by The Daily Beast, spoke bluntly on condition of not being identified. “If you go back 10 years, every single person in Hollywood was jealous of Viacom. They were the greatest company. They had an advantage over all of us. They had this amazing cable content [MTV, Nickelodeon, Comedy Central], they had a great film studio [Paramount]. And now they have chosen singlehandedly not to invest, and frankly there’s been no creative leadership there.”
A recent story in Bloomberg Businessweek, for instance, reported double-digit Nielsen ratings declines for Viacom’s most popular cable networks—“including Comedy Central, BET, VH1, Nickelodeon, Spike, and TV Land,” the story said—and a dizzying 21.7 percent prime-time plunge at the company’s flagship outlet, MTV, along with a devastating 25 percent drop from last season in the target 18-to-34 demographic.
The departures of Comedy Central stars Jon Stewart and Stephen Colbert, along with next season’s leave-taking of the young-skewing comedy team Key & Peele, haven’t helped matters, and Viacom has been hard-pressed to convince advertisers and analysts that the Nielsen erosions should be discounted because traditional ratings measurements don’t accurately reflect the robust youthful audience for the company’s programming on various non-Viacom digital platforms.
The company also argues that regardless of platforms, its brands remain big draws with young viewers, as reflected in the level of social engagement among various outside media and subscriber video on demand companies. Meanwhile, such companies as Netflix, Amazon, Sony, Snapchat, Spotify, and Verizon have all been eager to incorporate Viacom’s programming into their video services.
“Viacom already has strong relationships with young audiences—the average age of our viewer is squarely millennial, and we engage them on all platforms, including digital,” a Viacom spokesman told The Daily Beast. “This contrasts with other media network groups that primarily serve older viewers, which requires them to go outside to find a way to reach the audiences we already serve.”
Yet media oracle Jason Hirschhorn, who worked for Viacom more than a decade ago as the chief digital officer of MTV Networks, recently criticized the company’s cost-cutting ways, including significant layoffs, writing in his influential MediaRedef newsletter: “I’m tough on Viacom because I grew up there and have great affection. It’s unrecognizable to me now. Devoid of strategy, culture and risk taking. Keep burning the furniture for heat.”
Predictions are often wrong, of course, especially in the media business. But the harsh view concerning the future of the company run by CEO Philippe Dauman, a corporate lawyer by training, and controlled by 92-year-old entertainment mogul Sumner Redstone, who despite reportedly failing health remains the reigning executive chairman of both Viacom and its corporate sister, CBS, was echoed by three other Daily Beast interviewees.
Naturally, it was strongly rebutted by a Viacom defender.
This defender, who also asked not to be identified, dismissed such dire prophecies as “absurd and uninformed schadenfreude,” and added that in the past decade the company has nurtured “a deep bench of creative leaders, been extremely well run, highly profitable”—$2.4 billion on $13.8 billion in revenue in 2014—“and has invested billions of dollars in programming, creating some of the biggest hits in its history.”
While those assertions might ring hollow on Wall Street, where Viacom’s shares have lost half of their value since a year ago, virtually every media stock has tumbled in recent weeks—a reflection not only of nervousness prompted by ESPN’s recent acknowledgement that it has been losing subscribers, but also of general investor discomfort over an uncertain digital future.
“This is an exciting and challenging time because we are in transition,” said the Viacom-criticizing media exec. “In five to 10 years, every single person will be watching television that is going to be delivered by IP [that is, digitally, via the “Internet Protocol”], and that means we can deliver to them more specifically, with better content and better advertising.”
But this exec cautioned: “The journey from A to Z is going to be bumpy, and I think there are going to be winners and losers.”
A top executive for a different media outlet, who also predicted Viacom’s ultimate demise, said the winners will be companies that climb aboard the swinging media pendulum and successfully ride it from traditional investments in distribution in the so-called “linear television” world, to ramped-up investments in content in the digital world, where distribution is comparatively cheap and easy.
“Companies like NBC Universal or 21st Century Fox and Disney have to figure out how they get into the digital world in a big way,” this exec said. “Cable distribution is shrinking and it’s only a matter of time till everything is online. Advertisers, who are always late to these trends, are beginning to shift their dollars from traditional TV to digital.”
For example, a study by the Magna Global Intelligence media consulting firm, which tracks audience trends and advertising effectiveness among other factors, predicted that traditional advertising—which accounted for 54 percent of ad sales across all platforms in 2014—will shrink to only 30 percent by 2019, supplanted by so-called “programmatic” ad purchases driven by digital technology.
“In a way, this looks like what happened in print 10 years ago—and the beginnings of that are starting to happen with video,” said another media industry leader. “Years ago, The New York Times was a $10 billion company, and they were a $10 billion company because they had trucks and printing presses and the ability to haul newspapers all over the place. Who could compete with that?
“And now the Times Co. is valued much lower”—around $2 billion—“precisely because they have all that stuff. The things that made them valuable in the past reduces their value today.”
Likewise, the much lower cost structure of digital video—compared to traditional television, for instance—could lend big media companies who take full advantage a competitive edge.
“Fewer young people are watching traditional linear television, and they’re starting to watch more and more shorter-form video through social media,” said this insider. “Digital media actually has a much lower cost structure and an equivalent or even larger audience than broadcast and cable television.”
BuzzFeed, for instance, claims to reach more than half the country’s 18-to-24-year-olds each and every month, and to do so spends an annual figure on content that matches Viacom chief executive Dauman’s $43 million salary.
The process of digital dominance will be slow and incremental, the insider predicted, with the increasing consumer power of streaming media, like Netflix, putting market pressure on cable bundling fees, potentially forcing cable distributors to lower prices. “It won’t be like the lion going after the gazelle; it will be more like tiny nips and cuts.”
While another industry insider dismissed the past week’s Comcast/NBC Universal announcement as “a cosmetic play”—a PR signal that the cable distributor, programmer, movie, and broadcast giant is hip to the brave new world—a second top media executive disagreed, insisting: “You’re going to see NBC lead the way, and then you’ll see Disney be a player and Murdoch be a player.”
This same exec speculated that Time Warner will not pursue the digital future as aggressively as its rivals because chief executive Jeffrey Bewkes (under whose 7½-year leadership the stock has jumped from a low of 16 to a high of 91) is laser-focused on primping up the company for a fabulously rewarding acquisition by another conglomerate—an observation that the first insider called “total horseshit.”
All of which recalls Hollywood screenwriter William Goldman’s famous caveat about the movie biz: “Nobody knows anything…Not one person in the entire motion picture field knows for a certainty what’s going to work.”