Tribune Company (NASDAQOTH:TRBAA)’s announcement that it is considering a sale of its newspaper business sounds like a good plan. It would be getting out of a struggling industry and working on growing its healthier division. However, that begs the question of how long television stations can fend off the effects of the Internet?
The Decline of the Newspaper
The Internet has nearly destroyed the newspaper business, with the slow decline of such storied brands as The New York Times hard evidence of the disruptive technology’s impact. Indeed, historical strongholds in advertising were quickly taken over by companies like Google Inc (NASDAQ:GOOG), Craig’s List, and Yelp Inc (NYSE:YELP). It’s been ugly for newspapers.
Everyone’s Getting Out
So The New York Times selling its Boston Globe assets to focus on its namesake paper is a good idea for a dying industry. Tribune Company’s announcement that it is considering a sale of its newspaper business altogether is an even bigger statement. Focusing instead on its more than 20 television stations does, indeed, sound like a good plan.
Video content has been a driving force for years. People simply enjoy watching the media they consume. So, in the end, Tribune should end up a stronger company. But for how long? It will own television stations, but it won’t be creating the content. It will just be distributing the content as a middle man of sorts. The Internet is increasingly looking like a nationwide competitor on that front.
Cable Deals
Two cable of recent years are noteworthy in this regard. The first was Time Warner Inc (NYSE:TWX)‘s decision to shed its cable assets to focus on its content generation businesses. This has been a good decision, since the value of content seems to be increasing as more and more companies look to distribute both old and new material. Note, too, that Time Warner plans to spin off its magazines to get closer to a pure play video content company.
Interestingly, Comcast Corporation (NASDAQ:CMCSA) buying the half of NBCUniversal that it didn’t own from General Electric Company (NYSE:GE) looks like a cable company beefing up to be what Time Warner is moving away from. While this is true, Comcast Corporation (NASDAQ:CMCSA) lacked the compelling content that Time Warner has. With the purchase of NBC it got premier content in one swift move.
With the cost of content increasing because of the aggressive efforts of companies like Netflix, Inc. (NASDAQ:NFLX) to fill out online media services, Comcast Corporation (NASDAQ:CMCSA) looks set to save money it might have otherwise spent to buy content. It will also have the ability to sell its treasure trove of content. That should make the deal a winner in the changing media space. And someday, it might follow in Time Warner’s footsteps and become a media focused company, too.
The Future of TV
Netflix CEO Reed Hastings recently told Bloomberg, “Our view is that over the next couple of years as Internet TV really grows, people will look back and say that this was the turning point.” He was talking about that company’s new original series House of Cards. But that isn’t the only show the company has in the works. Netflix is on track to create a large amount of exclusive content.
Amazon.com, Inc. (NASDAQ:AMZN) is heading down the same course, though with a slightly different twist. Regardless, the more these two services start looking like television stations that span the entire nation, the more trouble local television stations will have making money. Even the cable companies will find it increasingly difficult to sell customers on anything more than Internet access. Why pay $100 or more a month for content that you can get for less than $10 through Netflix?
Even Hulu, owned by a consortium of content creators, is going directly to consumers. The Internet, then, looks set to be a very bad thing for the middle men in the media space. This could make the Tribune’s efforts to sell its newspapers an exercise in shedding one struggling segment to watch the next segment crumble in a similar way.
A High Stakes Game
The media space is changing fast. There have already been clear losers, but it still isn’t obvious who the winners will be. That said, Tribune definitely has some challenges ahead. Investors should probably avoid it, even though the change it is contemplating makes business sense today.
The article Are Television Stations Going Away? originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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