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First Quarter Brings Changes to Media

Neil Macker, CFA

Neil Macker: Netflix kicked off the first-quarter media earnings for 2019 with surprisingly strong subscriber growth, both in the U.S. and internationally. Despite the strong growth, the company issued weak guidance for the second quarter, particularly on the domestic side where they only expect to add 300,000 new customers. This number would represent the second-lowest quarter for the company since the start of 2012. Beyond Netflix, as we look out into the rest of the media earnings, we expect Disney to report a relatively in-line quarter. However, we're more interested in a couple of big pieces. First, what do they expect from the Fox assets they recently closed on? As you can recall, the company has bought many of the Fox Entertainment assets including the studio business, the U.S. entertainment cable channels, and the international channels. We'd also expect to expect a number of questions around Disney+ and Hulu, which the company discussed recently at its investor day. For CBS and Viacom, we expect a continued question from investors about a potential lockup between the two companies. Also for CBS, we expect more questions on their direct-to-consumer strategy given the influx of new players in the space, including Disney+. Is CBS All Access at $6.00 a viable product, given Disney+'s $7.00 launch price? Additionally, for Viacom, we expect additional questions about the long-term planning for the company, which has now reallocated itself around six core channels. Does the company continue to invest in its studio business, particularly Paramount, which has been the slowest and worst growing of the movie studios over the last few years?