The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
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The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
We had a chance to tour ETM’s Studio down in TriBeca with a group of investors, followed by meetings with management (CEO CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin). Our biggest takeaway is how the narrative for the company has finally taken a turn. We didn’t get a single question about USTN or legacy CBS Radio stations. Rather, investors were most interested in ETM’s multi-platform audio strategy – i.e. how ETM plans on integrating its newly acquired podcast platform with its core business, radio.com and its analytics group – along with capital allocation (some thought ETM should be buying back more stock) and the 2020 political opportunity.
The hottest names this week were BBGI (893 bps better than the S&P), CABO (628 bps), OUT (521 bps), NFLX (455 bps), and LAMR (272 bps).
The Q4 print itself was actually pretty good – HSD adds were exceptionally strong and all the financial metrics essentially in-line with Consensus. However, the market’s sentiment quickly changed during the conference call when we learned that: 1) CMCSA is expecting greater video sub losses in ’20 vs. ’19; 2) cable margins are expected to be up “only” 50bps in 2020; and 3) FCF is expected to be down in 2020 given various investments the company is making before returning to growth in 2021. In our view, the company sent a clear message that while the cable and NBCU businesses remain healthy, expectations needed to be reset for the year.
Video sub losses are expected to accelerate in 2020. As a reminder, CMCSA lost 733k subs in 2019. We were already expecting a decline (to -865k), but perhaps that decline is too conservative. Notably, this commentary did seem to come as a shock to some and is taking the stock (and many media stocks) down today.
Compared to our estimates, cable was ahead at $14.77B vs. our $14.72B, NBCU missed at $9.15B vs. our $9.27B and Sky beat at $5.04B vs. our $4.85B. Compared to Consensus, it looks like cable was in-line, NBCU missed by 0.4% ($37MM), and Sky beat by 4.2% ($202MM).
The hottest names this week were GTN (797 bps better than the S&P), SSP (753 bps), TGNA (695 bps), SBGI (623 bps), and NXST (140 bps).
There was a lot of material covered on Peacock at CMCSA’s investor day (January 16th in New York), and we wanted to share our biggest takeaways – which are: 1) Peacock is truly unique – there is no OTT product that combines this type of premium content with an advertising model out there, 2) CMCSA’s guidance and forecasts seem quite conservative in our view, and 3) we think the platform is scalable globally. Bottom line: we walked away from the investor day impressed.
As many of you have already heard, Marci has taken the plunge and left Wall Street after an exemplary 17 years to join Comcast as Senior Vice President, Investor Relations. We wish her the absolute best of luck in this new chapter of her career.
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