U.S. Media & Entertainment Industry - Rebooting The U.S. Media Sector In A Post Pandemic World - S&P Global
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U.S. Media & Entertainment Industry
Rebooting The U.S. Media Sector In A Post Pandemic World
January 2020 Media & Entertainment Group:
Naveen Sarma, Senior Director
Jawad Hussain, CFA, Director
Vishal Merani, CFA, Director
Rose Oberman, CFA, Director
Samantha Stone, DirectorU.S. Economics | Recession Takes Hold
End of the cycle. The COVID-19 pandemic has brought the longest economic
expansion in U.S. history to an abrupt end. In our baseline, we forecast GDP will drop
by 3.9% in 2020, down from our pre-virus December forecast of a 1.9% gain and our
June forecast of a 5.0% drop..
Short and sharp. The COVID-19 recession was on par with the economic losses seen
during the Great Recession, but over a much shorter time frame. In our deep
recession scenario, downturn reemerges in the fourth quarter as COVID-19 case flare
up and the bridge the government began building with stimulus only made it halfway
to the other side.
Policy response. As this sluggish recovery unfolds, three risks remain: no coronavirus
vaccine yet available as U.S. heads into flu season, no new fiscal stimulus, and trade
tensions with China on the rise.
2Corporates | Diverging Paths to Recovery
– Higher leverage incurred during the pandemic will lead to a
slow recovery of credit metrics in many sectors.
– Low interest rates and the long road to recovery puts financial
policy as a key factor and variable that could further shape
and delay the recovery timeline.
3North America | Downgrade Potential By Sector
Current Negative Bias (Oct. 31, 2020) 5-Year Averages
Oil & Gas (59) Automotive(32) 64%
38%
Media/entert (159) 60%
20%
Retail(59) 59%
Capital goods (71) 24%
Aerospace/defense (24) 51% – Echoing the global trends, North American sectors including oil and gas,
31%
Transportation (31) 51% auto, media, and lodging face the highest downgrade risk in the present
23%
Consumer products (112) 48%
time.
CP&ES (51) 20%
48% These sectors have seen:
Metals/mining/steel (26) 16%
Forest (28) 45% – Volatile market conditions affectingtheir business conditions (auto, oil
26% and gas, lodging, as well as retail).
Financial institutions (56) 44%
Health care (50) 20% – Structural dislocation in the auto sector before the pandemic.
39%
Telecommunications (17) 22%
– Effects of travel bans and social distancing measures on the business
Utilities(40) 37%
12% prospects of issuers in leisure, tourism and travelsectors.
Home/RE(22) 36%
21%
High technology(32)
32%
Insurance(22) 18%
21%25%
24%
16%
17%
10%
13%17%
17%
9%
0% 20% 40% 60% 80%
Data as of Oct. 31, 2020 and include sectors with more than five issuers only; excludes Sovereign. Source: S&P Global Ratings.
4U.S. Media & Entertainment | COVID-19 Related Rating Actions
Pre-COVID as of Feb 1, 2020
Current view as of November 25, 2020
Source: S&P Global Ratings
U.S. has taken over 100 COVID-19 related ratings actions since February
– 15% of ratings now ‘CCC+’ or below (compared to 8% pre-pandemic)
– Three investment grade ratings actions – Expedia (BBB-/Negative/--) and Walt Disney (BBB+/Neg/A-2 (twice)
– COVID-19 related defaults – AMC Entertainment and Cineworld
– 47% of ratings have negative outlooks or CW Neg (20% prior to crisis), signaling further downside risk
5U.S. Media & Entertainment | Key 2021 Industry Themes & Concerns
Issue What’s The Big Deal? Sectors / Companies Affected
Uncertainty as to whether national television remains the premium medium
Advertising trends and recalibration • Transit
Recovery of lagging sectors, especially transit
of secular trends • Local (TV, outdoor, radio)
How do local markets perform – recovery or set back?
• Broadcast networks
Is it better win but overpay OR lose but salvage financial metrics? 2021/2022 credit metrics
• TV station operators
Renewal of NFL broadcast contract Winners will likely face weaker credit metrics due to depressed EBITDA and cash flow
• AT&T – Already elevated credit metrics
What does this do to relationship between broadcast networks and TV station operators?
• Digital platforms as many companies issued debt
S&P targeting return to normalcy in 2H21 though gov’t imposed restrictions may delay recovery to shore up liquidity during crisis
Pace of recovery for out of home • Theme parks, live events,
Uncertain how consumers will behave (roaring twenties or bunker mentality?)
sectors concerts, theaters – Streaming initiatives will depress
Reaction will determine fate of those companies with elevated leverage
margins and cash flows until
Shrinking theatrical window platforms gain scale and reach
• Film studios
Film windowing Day and date strategy
• Exhibitors cash flow breakeven
Rebuilding fractured relationship between film studios and exhibitors
Streaming strategies in full display with launches by all major media companies (finally) – Will the recovery come in time for
Pivot to a streaming world Differentiation in performance (ie, subscriber growth) of various streaming services • Media companies low rated (B/CCC) companies?
How long before we pick winners & losers?
Was improved pace in 2020 an anomaly or is video penetration finding a new floor ?
Pace of cord cutting • Television
Impact on television compounded by declining audience ratings
Social media platforms under fire from regulators, legislators, & courts
Regulation of social media Potential reform of section 230 of the1996 Communications Decency Act • Social platforms
Antitrust lawsuits against Facebook and Google
Pay-TV distributors versus out of favor linear networks • Television
Distribution versus content
New powers in distribution (Roku, Amazon, Apple) • Diamond Sports
Consolidation to achieve scale – scale is increasingly key differentiator
M&A Rationalizing noncore assets within existing portfolios and adding new capabilities and assets • All of media
Aided by availability of low cost financing and excess cash on the balance sheet
6U.S. Media & Entertainment | Near-Term Recovery From Pandemic
• Advertising-based media
– Current state: TV better than expected, radio in line, and outdoor weaker due to transit
– Near term advertising trending positive (negative yr/yr but sequentially improving) for all media except transit
o Return of sports, especially NFL
o Scatter market pricing has returned to pre-COVID levels
o 2020/2021 TV upfront nearly completed with prices up and volumes down
o Record political advertising in 3Q and 4Q masks underlying performance of local TV
o Solid growth in digital advertising – April was only declining month
• Out of home entertainment
– Current state: Movie theaters, theme parks, & some sports events have re-opened but with limited attendance, live events (concerts, theater, conferences) still closed
– Uncertain return path to normalcy:
o Timing will vary depending on type of business and geographic location
o Lifting of gov’t mandated social distancing measures could help pace of recovery but lingering consumer fears will ultimately affect return to normalcy
o Broad global second wave or local / regional virus flair ups could result in volatility
o S&P assumes vaccine will be widely available by middle of 2021
7U.S. Media & Entertainment | Under Pressure From COVID-19 And Recession
Media Subsectors Ratings impact
Long Term Revenue EBITDA Credit
Impact If No Impact to Decline - - Decline - - Revenue Metrics
Vaccine In Business 2021 versus 2021 versus Recovery To Recover to
COVID- 19 Recession 2021 Profile 2019 2019 2019 Levels 2019 Levels
Data/ professional publishers Low Low Low Neut ral >=2019 >=2019 Lit t le impact Lit t le impact
Video gaming Low Low Low Posit ive >=2019 >=2019 Lit t le impact Lit t le impact
Music publishing Low Low Low Neut ral >=2019 >=2019 Lit t le impact Lit t le impact
Streaming service providers Low Low Moderat e Posit ive >=2019 >=2019 Lit t le impact Lit t le impact
Local TV stations Low Moderat e Moderat e Neut ral 0% t o 10% 0% t o 10% 1H21 Lit t le impact
Moderat ely
Broadcast networks Moderat e/ Low Moderat e Moderat e 0% t o 10% 0% t o 10% 2021 2021
Negat ive
Cable TV networks Moderat e/ Low Moderat e Moderat e Negat ive 10% t o 20% 10% t o 20% 2021 2021
Moderat ely
Radio stations Low High Low 10% t o 20% 10% t o 20% Never 2022
Negat ive
E- commerce services (non travel) Moderat e/ Low Moderat e/ Low Low Neut ral >=2019 >=2019 2021 2021
Ad- supported online content
Moderat e/ Low Moderat e/ Low Moderat e/ Low Posit ive >=2019 >=2019 Lit t le impact Lit t le impact
platforms
Ad agencies and marketing services
Moderat e/ Low Moderat e Moderat e Neut ral 0% t o 10% 0% t o 10% 2H21 2021
companies
Printing Moderat e Moderat e/ Low Moderat e Neut ral 10% t o 20% 10% t o 20% Never 2022+
Educational publishing Moderat e/ High Moderat e Moderat e Neut ral 10% t o 20% 10% t o 20% Never Never
Magazines & Newspapers Moderat e/ Low High Moderat e/ Low Neut ral 20% t o 30% 30% t o 40% Never 2022
Outdoor Moderat e/ High Moderat e/ High Moderat e Neut ral 20% t o 30% >=50% 2023 2023
Film and TV programming production Moderat e/ High Moderat e/ Low High Neut ral 10% t o 20% 10% t o 20% 2022 2022
Trade shows and conferences High Moderat e/ High High Neut ral >=50% >=50% 2023 2023
Motion picture exhibitors High Low High Negat ive >=50% >=75% 2022 2022
E- commerce services (travel) High Moderat e High Neut ral >=50% >=90% 2023 2022+
Live events High Moderat e High Neut ral >=40% >=40% 2022 2023
Theme parks High High High Neut ral >=50% >=90% 2022+ 2023
8U.S. Media & Entertainment | Revenue Exposure To COVID-19 (2019 Mix)
Affiliate Advertising Merchandise SVOD Other
Theme Content Cable /
Company Theatrical licensing and Publishing SMB
Total Total parks licensing Total Telecom Total
retail
AMC Networks 66% 32% 0% 0% 0% 0% 0% 1% 0% 0% 0%
AT&T 7% 4% 0% 4% 3% 0% 0% 0% 79% 0% 2%
Charter 0% 3% 0% 0% 0% 0% 0% 0% 88% 8% 0%
Comcast 8% 13% 5% 8% 1% 0% 0% 0% 56% 7% 1%
Discovery 43% 54% 0% 0% 0% 0% 0% 0% 0% 0% 2%
Fox Corp 48% 43% 0% 0% 0% 0% 0% 0% 0% 0% 9%
Lions Gate 35% 0% 0% 24% 38% 0% 0% 1% 0% 0% 2%
Netflix 0% 0% 0% 0% 0% 0% 0% 99% 0% 0% 1%
ViacomCBS 31% 40% 0% 23% 2% 0% 3% 0% 0% 0% 1%
Walt Disney 23% 15% 29% 11% 7% 6% 0% 3% 0% 0% 5%
Content licensing includes TV/SVOD licensing and home entertainment
Comcast SMB exposure includes all of business services
Last annual reports for all companies
Disney of September 28, 2019. Does not fully consolidate 21CF
AMC, AT&T, Charter, Discovery, Netflix, and ViacomCBS as of December 31, 2019
Fox as of June 30, 2020
Lions Gate as of March 31, 2020
Source: company reports, S&P estimates
9U.S. Media & Entertainment | Longer Term Impact Of Pandemic
• Consumer and business behavior changes after every significant crisis – the COVID pandemic is no different
• Secular trends accelerating
– Audience fragmentation
– Accelerating decline of video bundle (cord cutting)
– Decline of general entertainment and premium cable networks
– Advertising mix shifts further towards digital platforms
– Uncertainty surrounding national television as the premium medium
• Every crisis brings opportunities
– In-home entertainment – video gaming, streaming video services
– New monetization windows (PVOD) / shortened theatrical release window
– Cost optimization / cost reduction
• Long term impact to credit ratings still to be determined
– In what condition will businesses/companies emerge from this pandemic
– S&P views on media sectors could change, potentially resulting in revised ratings thresholds
10U.S. Media & Entertainment | 2021 Advertising Recovery Driven By Digital
Excluding Digital, Advertising Doesn't Return to 2019 Level
Segment 2020f 2021e
140%
Digital 5.0% +14.0%
130% Local TV (incl
+5.7% -5.2%
political
Revenue as a % of 2019 Levels
120% Network TV -10.0% +10.9%
Cable TV -12.5% +8.2%
110%
Total TV -10.0% +5.1%
100%
Radio -23.5% +18.0%
90% Outdoor -21.5% +17.5%
Advertising (ex
80% -19.9% +6.9%
digital)
Total advertising -9.4% +10.3%
70%
2019 2020 2021 2022
U.S. GDP -4.0% +3.9%
Digital Local television (incl. political) Network television*
Cable television* Total television Radio
Outdoor Advertising, excluding Digital Total advertising
Local TV includes political; network and cable include Olympics in 2021e
Source: “Reassessing The Pace Of Recovery For U.S. Media”, published October 20, 2020
11U.S Media & Entertainment | Pivot To Content-Centric Model Offers Flexibility
Media companies will increasingly prioritize distributing new
Primary Monetization Secondary Monetization content via streaming platforms over traditional distribution
media (theatrical release, television).
– Some streaming content may get shown
Film (theatrical release) Consumer Products secondarily on television and AVOD services to
drive consumer traffic to SVOD streaming
Linear TV Experiences platforms (reverse of Breaking Bad)
Sell to third party Gaming – Media companies will continue to pursue ways
IP / Content to expand monetization of owned IP. Disney
Streaming services International remains the model for its peers.
o AVOD Publishing
o SVOD/Hybrid Theater
Theme parks
Third party promotions
12US. Media & Entertainment | Relative Global Positioning
We believe general entertainment SVOD services can achieve
profitability and free cash flow with economies of scale (global
reach and scaled content)
G – Only AT&T (Warner Media) and Walt Disney have
l scale in owned content though AT&T has yet to
o pursue global reach.
– Netflix continues to aggressively build out its
b In For The global library even as it loses its licensed content
a Long Haul? back to the studios.
l – Midsized studios lack depth / breadth of content,
leaving them in strategic no man’s land.
– While the tech companies have global reach, they
R
Niche Strategies have yet to commit to building scale in content
e and we have yet to be convinced that they want
a media for more than as a retention tool.
– Companies with smaller content libraries will find it
c increasingly tough to go it alone.
h DTC Powerhouses
No Man’s Land
Scale of owned content
13U.S. Media & Entertainment | Consumers Faced With A Crowded SVOD Universe
Niche SVOD General SVOD
NHL.TV MLB.TV NFL Sunday Ticket
NBA Team/League Pass
Strategy Market size Willing-ness Content Brand differe-
to pay invest-ment ntiation
$20
Fox Soccer Match Pass DAZN
GE SVOD High High High High
$15
HBO MAX
GE AVOD Medium Medium Medium Medium
Netflix
NBC Sports Gold YouTube Premium Hulu
Criterion Channel Showtime Low High Medium High
$10 Niche SVOD
WWE Network BET+ Bleacher Report Live Paramount+
Starz Prime Video
DC Universe Noggin Quibi
Crunchyroll Food Network Kitchen Disney+ Niche AVOD Low Low Low Low
Sundance Now Fandor Shudder Acorn TV Fox Nation EPIX Now Paramount+ Hulu
Boomerang Urban Movie ESPN+ History Vault AMC+ Quibi Hallmark Movies Now Apple TV+ $5
OTT--Over the top. SVOD--Subscriber video on demand. AVOD--
Peacock Ad-supported video on demand. GE--General entertainment.
CuriosityStream
Niche AVOD General AVOD Free
MotorTrend Go Cartoon Network
Laugh CBS Sports HQ CBSN Vudu IMDb TV
Out DiscoveryGO Crackle YouTube
tubi
Entertainment Pluto TV Roku Channel
Tonight Xumo
More Niche General Entertainment Focused
Indicates hybrid service having both subscription and ad-revenue
14U.S. Media & Entertainment | Not All Will Succeed
Parent company Apple Amazon.com Discovery Walt Disney AT&T Walt Disney Netflix ViacomCBS Comcast
$8.99 (Basic) CBS All Access: Free (ad-supported)
$4.99 $5.99
Monthly sub price $4.99 $8.99 $7.99 $14.99 $14.99 (Stndrd) $5.99 $4.99 (Prem)
$6.99 (ad-free) $11.99 (ad-free)
$17.99 (Prem) $9.99 (ad-free) $9.99 (Prem ad-free)
Advertising No No Yes No Planned Yes No Yes Yes
1 (Basic)
Streams
6 2 TBD 4 3 1 2 (Stndrd) TBD 3
Download
4 (Prem)
Disney, Pixar, Marvel,
CBS, Viacom Showtime,
Originals, 3rd party TV Discovery, Scripps, A+E, 21CF, National Disney, 21CF, FXX, Originals, NBCU content,
HBO exclusive
shows & movies, NFL BBC Geographic & Lucasfilm originals, third party TV third party TV The Office,
Available Content Original content content, Warner Bros original content
Thursday Night, 3rd party 50 series at launch content. shows and shows and Live sports (Olympics) &
owned & original content Over 30,000 episodes &
SVOD services 55,000 episodes 11,700 episodes & 700 movies movies news
movies
movies
U.S., Nordics, Italy, 26 U.S., Europe, India, U.S. and 190 countries U.S., Canada, and
Availability (Year launched) >100 countries >200 countries U.S. U.S.
markets in 2021 Japan, LATAM Japan (not China) Australia
U.S. Mobile Service Partner Verizon Verizon AT&T T-Mobile
Est. users (mil.) 10+ 100+ 5.2 73.7 38 37 195 (US 73) 11+ 22
15
Source: Company reports, S&P estimatesU.S. Media & Entertainment | Assessing Media Companies’ Streaming Strategies
Company OTT Strategy Key DTC brands Brand Content Owned IP Cash Overall Comments
strength library Flow position
• Tech platform is gold standard
Netflix Broad reach (SVOD) Netflix H M M/L L H • Not owning a studio isn’t a strategic weakness, at the moment
• Moving toward free cash flow
Segmented across Disney+, Hulu, • Strongest IP and brands
Walt Disney multiple services ESPN+, Star
H H H M H • Track record of global success with Disney+
While it’s still too early to pick winners and losers, media
• Is HBO the right brand name? companies are pursuing streaming strategies that reflect
Broad (SVOD with
AT&T (Warner Media) HBO Max H/M H H H H/M • Could be very successful given Warner library and strong brands
Hybrid planned) their IP and content libraries.
• Pricing versus peers
Tiered approach, with • Hired gun strategy reflects smaller IP Key factors for success will include:
Paramount+,
ViacomCBS premium, SVOD, & M/L M M M/L M • DTC strategy (SVOD, AVOD) hits all four quadrants
Showtime, Pluto TV – Scale & subscriber growth
AVOD • Risk of underinvestment due to limited financial flexibility
– Branding & consumer awareness
Discovery+, FNK, • Can Discovery+ expand beyond niche?
Discovery Niche but global H/M M M M M
Eursport, Golf • Unique watch and buy strategy – Profitability & cash flow
• AVOD service linked to cable service reflects desire to defend
Comcast (NBCUniversal) Hybrid/AVOD Peacock M M M H H/M core cable business
• Is size of library sufficient?
Tubi • DTC currently limited to Fox Nation and Tubi
Fox Niche H L L M L
Fox Nation • Potential to offer sports DTC service
AMC+, • Niche strategy, difficult to replace lost revenues and cash flow
AMC Networks Niche M/L M/L L L L
Sundance, Shudder from declining linear TV operations
Rankings not reflective of current credit ratings
16U.S. Media & Entertainment | SVOD Services Feeding U.S. Video Content “Bubble”
600
Estimated Number of Scripted Original Series
532
Online Services 487 495
500
455
Broadcast
421 117 Fierce competition New content production levels finally returning to normalized levels
Pay Cable 389 93 160 to differentiate
400 49 with complex TV and film productions still delayed
349 33 Broadcast networks reducing output from 2015 peak as basic cable
Basic Cable
24 abandons originals
300 288 150 Capped by primetime SVOD services aggressively expanding original series offerings
266 15 148 145 153 hours
6 131 146 – Old media will increasingly prioritize new content to online
210 216 platforms over traditional distribution media
1 4 119 37
200 182 116 34 36 42 Will increase modestly
How much original content is necessary for the SVOD services?
33 as focus shifts to
113 45 streaming
122 29
135 33
Dimishing value for
100 25 174 186 181 175 originals on basic
21 161 144
111 125 cable
17 66 74
30
0
2002 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: FX Networks Research
17U.S. Media & Entertainment | Sports Is Glue Holding Video Bundle Together
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
NHL (NBC) Commitment to sports is double-edged sword
Belmont Stakes (NBC)
MLB (ESPN) – Over $150 billion in sports rights commitments
NFL Monday Night (ESPN)
MLS (Disney, Fox)
– High profile major sports rights available in 2021 (NHL, MLB)
NFL Sunday (CBS, Fox, NBC)
– NFL accounted for 65 of top 100 TV telecasts in 2019
NFL Thursday (Fox)
NFL Sunday Ticket (DTV) – Sports not immune to declining audience ratings (NFL down 6% through
WNBA (ESPN)
midpoint of 2020/2021 season)
Preakness (NBC)
Premier League (NBC)
When will digital platforms challenge broadcast networks for premium sports rights?
Formula One (ESPN)
UFC (Disney) – Network TV still only distribution platform offering full national reach
Wimbledon (ESPN)
SEC football (CBS) – Need to gain production experience and develop stable and scalable streaming
Big Ten (ESPN, Fox) platform for live video
French Open (NBC)
NASCAR (Fox, NBC) – May become attractive for second tier sports leagues
PAC-12football (ESPN, Fox)
WWE (Fox, NBC)
– Sports leagues continue to experiment with streaming platforms – CBS All
Champions League (CBS beg in 2021) Access (UEFA Champions League), Facebook (La Liga and MLB) and Amazon
NBA (Disney, Turner) (TNF and EPL)
USTA US Open (ESPN)
Big 12 football (ESPN, Fox)
Notre Dame Football (NBC)
Kentucky Derby (NBC)
FIFA Soccer (Fox, Televisa)
BCS playoffs (ESPN)
MLB (Fox, Turner)
PGA (CBS, NBC)
PGA Championship (CBS, ESPN)
NCAA Basketball (CBS, Turner)
Olympics (NBC)
SEC football (ESPN beg in 2023)
Source: Company reports, S&P estimates
18U.S. Media & Entertainment | Television’s Future Is Tied To The NFL
NFL Package Expiration Date Average Annual Current ‘19 Ad Rev Avg. Viewers Comments Existing contracts expire after 2021/2022 (MNF) and 2022/2023 seasons
Price Partner Share (vs. 2019)
– 2020 NFL ratings down 7% versus 2019 season (through week 13)
– New players’ collective bargaining agreement through 2030 season
Is it better to overpay or to lose contract?
Thursday Night 2022/2023 $660mm FOX -- -13% • Unlikely to attract other bidders than Fox
– Cost escalation for next contracts lowers EBITDA and depletes free
cash flow generation
AFC Sunday 2022/2023 $1,030mm CBS 24% -3% – Loss of NFL contract hits audience ratings, advertising, and
contractual leverage over distributors
NFC Sunday 2022/2023 $1,100mm FOX 39%# -1% Potential outcomes:
– New media companies unlikely to win broadcast contracts but could
• NFL has opt out option after 2019 season expand digital streaming rights
Sunday Ticket 2022/2023 $1,500mm DIRECTV -- --
• Opportunity for streaming service to win? – Reshuffling of rights owners as Disney may aggressively pursue
additional broadcast packages
– Will the NFL encourage Warner Media (TNT/TBS) to bid?
• #1 broadcast show on television
Sunday Night 2022/2023 $950mm NBC 21% -18%
• Super Bowl broadcast and flex schedule rights – Credit ratings impact will depend on price paid and importance of NFL
to business
• Most expensive on a per viewership basis
Monday Night 2021/2022 $1,900mm ESPN 17% -4% • Does not include Super Bowl broadcast rights but does include
Pro Bowl and NFL draft
Ratings are P2+, L+SD through first 13 weeks of 2020 season
Fox ad share includes both Thursday and Sunday NFL
Source: The Washington Post, company reports, S&P estimates
19U.S. Media & Entertainment | Ranking 13 Major U.S. Media, Telecom, & Cable Companies
Rating Business Risk Profile Current LTM Adjusted Upgrade Threshold Downgrade Implied BBB
Leverage Threshold Downside Threshold* The battle for consumers' attention spans has intensified. While
much of the attention has been focused on the impact on the
Comcast A-/Stable/A-2 Strong 3.0x 2.0x 3.0x 4.0x media and entertainment sector, the convergence of the media,
telecom, and cable sectors means that these secular pressures
Walt Disney BBB+/Negative/A-2 Strong 5.2x 3.0x 3.5x 4.0x are affecting the entire coverage sector.
– Media companies have finally conceded that the pay-TV
Equinix BBB-/Stable/-- Strong 3.7x 3.75x 4.25x 3.75x ecosystem is dying and have been forced to
experiment with their DTC services.
Charter Communications BB+/Stable/-- Strong 4.4x 4.0x 4.75x 3.75x
– The cable companies, while experiencing worsening
Verizon BBB+/PositiveA-2 Strong 2.5x 2.5x 3.25x 3.75x video subscriber losses, have benefitted from this trend
because they have the best and fastest broadband
AT&T BBB/Stable/A-2 Strong 3.4x 3.0x 3.75x 3.75x internet pipe into the home.
– The wireline industry, with its dependence on inferior
Netflix BB/Stable/-- Satisfactory 2.8x -- -- -- copper plant, continues to lose its broadband customers
to the cable sector at an alarming rate.
Cox Enterprises BBB/Stable/A-2 Satisfactory 2.9x 2.25x 3.25x 3.25x
– The wireless industry remains poised to reap the long-
ViacomCBS BBB/Negative/A-2 Satisfactory 3.9x 2.25x 3.0x 3.0x term benefits from 5G, which will combine mobility with a
faster broadband pipe.
Fox BBB/Stable/-- Satisfactory 1.2x 2.0x 3.0x 3.0x
Discovery BBB-/Stable/A-3 Satisfactory 3.4x 2.75x 3.5x 3.0x
Sinclair BB-/Negative/-- Satisfactory N/A 4.5x 5.5x 3.0x
Nexstar BB-/Stable/-- Satisfactory N/A 4.5x 5.5x 3.0x
Note: Ratings as of Dec 22, 2020
Adjusted Leverage as of Sept 30, 2020 except AT&T and Cox,. Disney’s leverage is estimated.
Thresholds for Netflix based on cash flow-to-debt metrics.
Leverage for Sinclair and Nexstar elevated due to recent acquisitions 20
See “Amid Secular Pressures, Most U.S. Media Companies' Long-Term Prospects Have Diminished Somewhat” article, published February 19, 2020Copyright © 2020 by Standard & Poor's Financial Services LLC. All rights reserved.
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