Studios have been in a retreat for several years. Walt Disney Co. (NYSE: DIS) has needed to “rationalize” its expenses. In its scramble, the entertainment company has married its gaming and interactive units — as if an alteration in executive responsibilities could stop turmoil in either unit.
Investors fear that Viacom Inc. (NYSE: VIAB), NBCUniversal and Time Warner Inc. (NYSE: TWX) will be no better off than Sony or Disney over time. Sales and operating profits dropped at Time Warner’s Film and TV Entertainment division last quarter. Viacom’s Filmed-Entertainment sales and operating income rose in the most recent quarter, but were down sharply in its fiscal year that ended on September 30. All signs point to a decline across the sector.
The proof of the inexorable decline in traditional video media is not just in the fall off in its numbers. It is also in the surge of sales and employment at companies like Google Inc.’s (NASDAQ: GOOG) YouTube, Hulu, VEVO and Vimeo. According to comScore data for video activity online in October, not a single traditional media company placed in the top 10 by the measure of unique visitors. Facebook Inc. (NASDAQ: FB), Amazon.com Inc. (NASDAQ: AMZN) and each of the big three Internet portals did. None of these companies has announced a restructuring or layoffs at its video units. For them, the video world holds too much promise. And in their attacks of traditional media companies they will need to steal advertising and the equivalent of ticket sales.
Corporate cost cuts are not a sign of retreat in every case. However, Sony’s cuts are a measure of the extent to which large entertainment companies are working on strategic retreat in a battle they have already lost.
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