Forget Netflix, is there a bigger threat to Nine Entertainment Co Holdings (ASX: NEC), Seven West Media Ltd (ASX: SWM), Fairfax Media Holdings Limited (ASX: FXJ) and News Corp (ASX: NWS)?
Structural Issues
I wouldn't add anything new by saying that traditional Australian media companies are under the thumb of technology, as shown in the chart above.
Over the same period that these shares have fallen, Netflix shares have returned 3,200%. But Netflix isn't the only threat to traditional media.
As of 2015, 61% of the U.S. population got their political news on Facebook, according to the Pew Research Center. Whilst Baby Boomers continued to prefer local television, Generation X and millennials both choose Facebook.
"During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a nice profit." – Peter Lynch
We have all heard of the controversy surrounding Facebook's policing of fake news during the U.S. Presidential elections, but what is important for investors to note is the power of the platform. If 61% of people get news from social media, which is only getting more popular, the barriers to traditional media will continue to fall and revenues will tumble. Facebook live, Youtube, Vimeo, Netflix, Twitter and Snapchat, these companies are the new generation of news and entertainment.
Foolish Takeaway
Some Australian media companies, such as Fairfax, have developed businesses (e.g. Domain) that are likely to thrive in the new media landscape. However, prudent investing requires us to look forward and glean an insight into the future of particular industries.
In my opinion, you do not have to look to the obvious names such as Netflix or Facebook to find companies that could benefit from these 'future' trends that are now in effect. Many innovative Australian businesses are capitalising on the rise of technology in the media domain.
