Media Stocks Tank Over Time Warner Outlook

Time Warner's stock tanked Wednesday after the company said it expects that 2016 earnings per share would come in below its previous target, that Turner subscriber trends have come in below expectations this year and that the company may license less TV content to digital platforms or do so later.

According to The Hollywood Reporter, CEO Jeff Bewkes said the company would spend aggressively on new content and other things and look to maximize its profitability and the value of its content for the long-term rather than near-term. "We have identified additional investments," he said, adding that they would "weigh on earnings."

Time Warner's comments, which came as the media company announced third-quarter results, stoked fears that pay TV cord-cutting is picking up pace and sent its shares down 6.6%.

The LA Times reports there's concern among media analysts that the transition to digital might be messier than first recognized.

Doug Creutz

"This is going to be a more volatile group for a while," said Doug Creutz, an analyst with Cowen & Co. "We've seen TV audiences dramatically decline. We're seeing ad dollars flow out of national TV and into digital. And they've got the specter of people cord-cutting."

There's fear that traditional media giants have fallen into a vicious cycle. As they turn their focus to subscription services such as HBO Now, are they giving consumers even more reason to ditch their cable and satellite TV packages?

Wall Street's skittishness has forced media firms to take a hard look at their strategies to make sure they are not sacrificing profits in a rush to embrace digital platforms. Some analysts have called for companies to reassess whether they have made too much of their programming available to Netflix, Hulu and other services — further encouraging a flight of TV viewers. Others suggested rate increases for online subscription services to boost profit.

"This isn't a near-term problem, but a long-term battle that is going to be fought for several years because no one knows what the future of the industry is going to look like," Creutz said.