Big media companies were supposed to die outright along with the old tube TV set. At least that was the thinking a few years ago as up-and-comers Netflix (NFLX) and Hulu let you bypass commercials, and Facebook (FB) and YouTube made it possible to create and share your own material. Given that, the recent performance of old- vs. new-media stocks might surprise you. This year the legacy players have shot up 34%, more than twice the gain of the S&P 500. Yet Facebook has fallen 45% since it went public in May. Why are the old guys ahead?
In short, Americans still like to watch television, especially live sporting events and buzzed-about series. Average time in front of the TV is up since 2003, from 2.6 hours a day to 2.8, according to the Bureau of Labor Statistics. What's more, even as more consumers watch shows online, traditional media are finding ways to earn money off that shift by creating live streaming tools and cutting deals with Netflix and Apple (AAPL, Fortune 500). Social media firms, on the other hand, are still struggling to figure out a profitable business model.
To cash in on the majority of Americans who still watch TV, favor broadcasters with must-have content. Traditional broadcast networks are thought of as the industry laggards: too dependent on ads, audiences shrinking. CBS (CBS, Fortune 500), a true pure play, is off 13% since the start of a disappointing fall TV season. But therein lies an opportunity. CBS leads its peers in potential syndication deals and has nine of the top 20 shows.
"The value of broadcast is enormous," says David Bank, equity research analyst at RBC Capital Markets.
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