The Media Industry is a Dangerous Place to Invest These Days

Disruption is leaving everyone, from investors to consumers, thoroughly confused.

Image by Jason Hoffman, Thrillist

I got quite a kick out of a recent piece by Alan Wolk for TV Rev.

Apple’s recent announcement of Apple TV Plus sent several media stocks tumbling. But among them was Roku, a company that will almost certainly benefit from selling Apple’s new streaming product.

While Apple also makes Apple TV, a set-top-box that competes with Roku’s own, that device has a relatively small market share and has always been more of a niche product, especially considering that it’s priced well above rivals.

This small episode is a perfect example of a growing reality facing the media industry.

The majority of participants in this market just have no idea what is going on.

Alan Wolk is the leading analyst in this industry with an entire career dedicated to understanding it.

Is that truly the level of experience needed to understand this space now?

Even the masses of professional investors, smart people whose jobs it quite literally is to understand where they’re putting their money, called it completely wrong! And it wasn’t just a mistake, their prediction was fundamentally contrary to logical reality.

Asleep at the Wheel

With that much uncertainty and fundamental misunderstanding out there, you really have to wonder… Do incumbent media industry firms themselves even know what’s going on? Or are they as foolishly confident as the Blockbuster executives who once laughed Netflix out of their office.

Being in an industry that’s beset by so much disruption, nothing can be taken for granted.

Roku, Apple, and Amazon aren’t simply rival device makers. They each offer a variety of overlapping products and services.

And there’s evidence all around of big moves being motivated by desperation and misunderstanding, rather than a sound understanding of the dynamics shaking up the industry.

A poster boy for this is Viacom. From the company’s high-profile purchase of Pluto TV to their merger with CBS, they’ve been making moves for the sake of making moves, rather than pursuing a strategy that’s likely to benefit them in the coming new era of media.

Consumer Confusion

When Wall Street investors seem to move markets in unusual ways, there’s generally an explanation. In this case, investors know big companies and brands like Apple and Roku, but when it comes to the finer details of their products and how they relate to each other, they can range from clueless to completely wrong.

From financial professionals, to individual stock-pickers, those market movers generally try to understand what they’re buying. They research industries and the companies they invest in.

And in this case, they still got it wrong.

For your average consumer walking into BestBuy or checking out the website of a streaming service, they’re probably not doing as much research about their purchases as someone investing significant money in stock.

How are they supposed to make good choices about streaming services and hardware? What happens when they inevitably make bad ones?

It’s rare that we get this clear of a look at a problem coming down the pike. And when it hits the fan, it could throw further complications into an already confusing space for consumers and investors alike.

Casino Economy

The media industry is changing. It’s going to look very different when all is said and done.

But what happens to the money invested in the media industry in the mean time?

In an industry that’s as volatile as this one currently is, today’s “blue chip” could be tomorrow’s bust.

Think back to the retail industry a few decades ago. Kmart was once one of the dominant players, now they’re almost out of existence. Despite many similarities, rival Walmart has survived and thrived amid the retail apocalypse.

Though we have the luxury of hindsight, to an investor in the 1990s, which of the two retail titans to bet on likely would have been a tough call. Meanwhile, another company named Amazon.com might not have even been considered, though it would have produced a much greater return.