According to research by ZenithOptimedia, advertising spend on the internet is set to overtake spending on television advertisements by 2017.
Driving the structural shift towards the internet are increased advertising spends on social media, online video and paid search platforms.
Arguably it's not an unexpected prediction, however, it may still be a wake-up call for some investors.
As investors in commodity businesses have experienced (painfully) over the past few years, just a small shift in supply and demand can have a dramatic effect on price.
A similar fate could be awaiting television network owners…
Recent news reports have speculated that Telstra Corporation Ltd (ASX: TLS) – which owns 50% of pay television business Foxtel – is considering offloading the Foxtel asset due to its poor outlook. That outlook is based on fierce competition from online streaming providers such as Netflix.
With all three of Australia's major free-to-air (FTA) networks listed on the ASX, shareholders of Seven West Media Ltd (ASX: SWM), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Ten Network Holdings Limited (ASX: TEN) could all be facing structural challenges even greater than what the market is currently factoring in!
More upside than downside
Despite the worrying outlook for FTA networks and Foxtel, arguably the outlook for Telstra remains bright.
Even if Foxtel is divested or experiences significant earnings declines, ultimately Telstra's market-leading exposure to higher future demand for internet services and online data outweighs the possible lost earnings from Foxtel.
