Media companies brace for declines in their share prices as concerns over online competition coupled with weak ad sales at Time Warner's Turner cable division spooked investors, prompting a sell-off.
Shares of major media and entertainment companies including Walt Disney, 21st Century Fox, CBS, Viacom and Discovery Communications all tumbled this week after Turner announced that ad revenue fell 2 percent last quarter, but ironically shares of Time Warner remained flat because the company is in the process of merging with AT&T in a $85.4 billion deal.
"This is the weakest first quarter in advertising growth for Turner in at least seven years. We appear to be at a point where pricing growth is not enough to offset the declines in volumes," Barclays analyst Kannan Venkateshwar wrote in a note to clients.
Time Warner has seen its television ratings and subscriber base shrink in the first quarter amid fierce competition from online entertainment outlets such as Snapchat and streaming services like Netflix. However, the company managed to somewhat losses recorded at its television units by making channels like CNN and HBO pricier, selling old successful shows like "Friends," as well as with the help of the "Lego Batman Movie," which was a box office hit. Time Warner posted earnings of $1.66 per share, marking the 33th straight quarter of better-than-expected results. The media giant also bought a 10 percent stake in the Hulu streaming service as it seeks to solidify its online footprint and ride the digital trend.
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