Scathing Media Downgrade Reads Positive for This SVOD Leader

While the stock is getting wholloped today on the general market malaise... if you read between the lines of Bernstein's scathing downgrade of big cap media names Disney (NYSE: DIS) and Time Warner (NYSE: TWX), it is a big positive for one company... Netflix (NASDAQ: NFLX).

While the analyst only made two small direct references to Netflix in the report, one of the key underlying themes of the downgrade was a loss of pay-tv subscribers.

Bernstein analyst Todd Juenger commented:

"The question of whether pay-tv sub declines are accelerating is only a question of "over what time frame?" Based on Disney's own comments, the rate of subscriber loss they are now seeing is higher than what they saw in April 2014. That is, by definition, acceleration. Other media companies say they are not seeing acceleration. But the rates are higher than they were one/two years ago (despite growth in household formation)."

Where do you thing these paid subs are going? Netflix, of course.

Then there's this on TV advertising:

"We believe TV advertising is entering a prolonged period of structural decline, caused by the migration of viewers to non-ad-supported or less-ad-supported viewing platforms, as well as the recent, massive growth in quality/quantity of online video advertising competitive offerings. "

The firm's conclusion in part reads:

"... we fear the entire sector will struggle to work until the content owners take concerted action to reclaim on-demand viewing from the SVOD services and use it to protect affiliate fees."

Netflix is down 6.8% today but remains up 133% year to date.

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