Technology's Effect on Entertainment Stocks

In an earlier post , I talked about Netflix and how the company was branching out and taking a different approach on things, having decided to release its own television series- the first of its kind.  I must have inadvertently kept their concept in mind, because whether it was subconscious or not, since then I've found myself continuously drawn to news stories about companies using Netflix and other new distribution platforms, stirring up traditional media and discovering original avenues of generating revenue through new forms of media.  

Because I am currently studying entertainment business finance in graduate school, I'm trying to make a dedicated effort to incorporate finance into my daily life and routine, hence the mentions in this blog entry.  I'm constantly looking for correlations between the subject and the entertainment industry, particularly my field of interest as an artist/talent manager, considering a vital responsibility of many managers is to advise their clients as to how to invest their money.  Establishing a solid financial background myself can and will definitely benefit me personally as well, so the more knowledgeable I become, the better .  

I began researching different entertainment and media companies after learning second quarter earnings were released earlier this week, and kept coming across articles mentioning CBS Corporation because their reported earnings were more than double that of last year.  Most analysts attributed this significant increase to the fact that CBS has decided to release many of its older hit shows such as Frasier and Cheers to Netflix.  Now internet users and Netflix subscribers can watch and enjoy CBS owned content at their leisure, where it was simply not available to them before.

Utilizing new methods of distribution not only offers more opportunities and freedom for the networks and studios, but it also offers more opportunities for actors, since with new media platforms, there is more room for additional projects, and more projects ultimately means more roles (and therefore more work for managers like myself).  The key is to think outside of the box because the opportunities are there, and with time and some patience and recognition, the opportunities are going to keep coming.  As a manager with clients just breaking onto the scene, harnessing the potential from these new media platforms can serve as a goldmine in securing my actors work.

In an August 2^nd article in Reuters, author Paul Thomasch writes that Les Moonves, the Chief Executive of CBS Corp., announced that deals could also soon be in the works with Apple Inc., Google Inc., Microsoft Corp., and Dish Network Corp.  Sam Schechner of the Wall Street Journal  writes that media executives hope that CBS’ bold and forward thinking moves “will be an arms race among technology companies to buy content to feed a new array of tablet computers and Internet-connected televisions”, mentioning that Amazon.com Inc. has already positioned itself to begin to compete with Netflix and has struck deals with both CBS and Comcast Corp’s NBC Universal as of late.  It seems as if everyone is beginning to realize that utilizing new forms of media can be advantageous to all parties involved.  This day and age, with all of the new developments in media distribution, has the opportunity to revolutionize the way consumers access and view programming.  The pioneers of these new avenues are at a major advantage, as can be seen by the significant increase in profits for companies such as CBS.

As I read through countless articles commending CBS for their non-conformist strategies, I became convinced that by taking chances and utilizing the not-so-traditional forms of distribution, they would continue to flourish, no matter what happened with the stock market and other outside influences.  And as quickly as I came to that conclusion, all of my beliefs were turned upside down.

As we all know, the stock market took a serious nose dive on Thursday, August 4^th, 2011, plummeting over 500 points.  Whereas many analysts were convinced (or at least trying to convince their readers and more likely than not, themselves as well) that the well-being of the entertainment and media companies was independent and not affected by the financial market, all of their theories were refuted in an instant.  Ironically, out of all of the entertainment stocks, CBS was hit the hardest, dropping over 9% over the course of that one day.  I guess when investors panic and want to get out, it doesn’t matter who they are or where they have their money.  If they think they may lose it, they are going to pull it and head for the hills, groundbreaking new distribution methods or not.

I want to come clean and confess that my knowledge of the stock market, investing, and finances at this point is probably comparable to that of a goldfish.  Actually, I probably shouldn’t even give myself that much credit.  Trying to wrap my head around the ups and downs of the market reminds me why I content as a biology major in college.  But, I am hopelessly optimistic that with a little guidance (okay, with a lot of guidance), that soon I’ll understand what is going on and why.  In my defense, from what I’ve read, which has been a considerable amount lately, even the most educated and experienced analysts seem to get as blindsided as the rest of us.  If I have learned anything so far, it’s that our economy and everyone who invests in it, is as fickle as they come.  Of course, if I had my life savings relying entirely on the fate the stock market, I have to assume I would be pretty fickle myself.

But, back to CBS and to Netflix and to these new forms of media and distribution.  Despite the major hiccup everyone experienced the other day, I am confident that the entertainment and media companies looking to take chances and utilize new technology and advancements in order to produce and distribute their programs are going to prevail.  It’s a well-known wives tale to not put all of your eggs in one basket.  CBS and Netflix are definitely following that advice.  The more avenues they pursue, the less affected they’ll be if an avenue fails and the greater chance of success they’ll have if an avenue is proven effective.

Personally, until I get a better handle on stocks and finances and investing in general, I’m going to look solely at the facts.  And the facts are, that technology is changing.  Everything we do and how we go about doing it is changing at lightning speeds.  Ironically, the only portion of CBS that did not see an increase in profits was their book publishing division, which simply proves that digital distribution is the way of the future for books as well as television and movies. I can say with great confidence that with such advancements as streaming online content and video on demand, there is endless potential for entertainment and media companies- what they produce and how they choose to distribute it.  And with this endless potential comes new and exciting opportunities for actors, their managers, investors, and viewers alike.  Stay tuned though, because it may be a bumpy ride.