MoffettNathanson's Michael Nathanson Shares Media Update and Forecast

In a candid discussion both admitted that there are so many unknown forces playing with the marketplace that their numbers may be malleable While there are significant differences in their approaches in the rearview mirror both acknowledged the ad industry has weathered the pandemic better than their anticipated scenariosquotThings were better for digitalquot commented Nathanson quotThe big digital names reported stronger performance than we expected There were worries about potential weakness from the small and medium enterprises in social but that didn39t amount to muchquot One of the factors that negated the worst case scenario was the strength of DTC brands whose lifeblood is direct response advertising Says Nathanson quotThe stay at home moment gave new brands like Peloton and Wayfair the ability to breakthrough and play on TVquot With Upfront advertisers looking to get out of commitments and networks wanting to show some flexibility it gave these DTC players the opportunity to advertise on inventory not usually available to them quotI underestimated the amount of money chasing the stay at home customer It brought money into the market that I didn39t expectquotNathanson39s forecasts show that at its low point digital growth declined by 7 while television experienced a 29 decline TV regained some of its momentum in June with Nathanson crediting the government stimulus and low interest rates for the reboundMyers and Nathanson both pointed to the patterns in past downturns and previous pandemics which provide indicators that recovery is going to take much longer than anticipated and to a very large extent is dependent on the creation of a vaccineNathanson39s current forecasts are more optimistic than Myers39 but that is attributable to the consensus assumptions in the current model assumptions that Nathanson is now secondguessing quotOur forecasts are based on a model where we still have a quotreturn to normalquot by Q4quot which he admits is looking less and less likely quotI think we are back to a duration which is really concerning about the improvement from here This COVID19 based disruption could last through the first half of 2021quotA large part of getting back to normal includes a resumption of new and original Broadcast and Cable TV programming for the Fall and most importantly a return of sports programming Nathanson believes that MLB NFL and top 5 NCAA conferences will start but whether they finish the season is up in the air While the Ivy League has already cancelled all sports for the Fall Semester for top colleges the money may prove too tempting quotThey really need football revenues in the door I am concerned that the quotPower Fivequot won39t see the football season finish They39ll start but I wonder how college finishes as it does put students at riskquotWhile Nathanson is 7030 that sports will happen Myers is the opposite based on the bigger challenges of many schools anticipating second waves and changing the school calendar which could adversely affect team practices in addition to the challenge of travel to states with outbreaksTurning to the Wall Street performance of media companies Nathanson39s analysis indicates that the companies with the stronger DTC offerings have recovered relatively well ViacomCBS leads the pack which is counter to Nathanson39s expectations quotI would not have predicted ViacomCBS being the best stock or sharp rise and I would have predicted more underperformance from traditional players ViacomCBS was oversold They did a good job of taking out a lot of costs ahead of this quarter They have Pluto TV and they39ve been telling more Over the Top storiesquot Nathanson is amazed at the growth in this situation of Netflix Apple and Amazon quotYou just pull up a chart on Apple Amazon and Netflix and it39s growth growth growth It39s shocking to see their market capquotNathanson predicts that cord cutting will significantly accelerate On one hand you have the economic toll of COVID19amp160 On the other major league sports contracts are beginning to be renegotiated including the NFL whose current contract ends in 2022 and the NH which ends with the 20202021 season The anticipated inflation to carry these events will be passed on to the consumer by their MVPDs in turn incentivizing more nonsports fans to cord cut MoffettNathanson is predicting an increase in cordcutting from 2 the same quarter a year ago to 7 this yearThe next Jack Myers Michael Nathanson Leadership Conversation is scheduled for September 17 The full MyersNathanson Conversation and all Jack Myers Leadership Conversations are available ondemand at MediaVillageAlso read Jack Myers and Michael Nathanson Read the Media Tea Leavesamp160 by Charlene WeislerClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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MoffettNathanson's Michael Nathanson Shares Media Update and Forecast

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