Market 'over-reacting' with cord-cutting fear, Nomura analyst says

Coming off a week in which media and pay-TV stocks lost an estimated $60 billion in market capitalization because of an onset of investor anxiety about cord-cutting, Nomura analyst Anthony DiClemente said Wall Street is over-reacting. 

"It was only this week that cord-cutting fears began to truly shake the market's confidence," DiClemente said in a note to media investors. "The biggest surprise to us was that this 'small subscriber losses' commentary was such a big surprise to the market. Our take is that the market has largely overreacted, as we do not believe the panic in the marketplace is proportionate to the quantitative evidence of underlying trends."

Individual media sector stocks fell by as much as 10 percent following a second-quarter earnings report from the Walt Disney Company, downgrading profit projections for the pay-TV ecosystem's top network ESPN. Panic was reinforced by overall pay-TV subscriber attrition in the quarter of more than 500,000 customers.

For his part, DiClemente said subscriber gains made by new over-the-top services being launched by traditional media and pay-TV companies--including Sling TV and Sony's PlayStation Vue--have more than offset the loss of traditional pay-TV subscribers. 

"For the second quarter," he said, "the media industry saw a net gain of 34,000 subscribers including online video distribution." (Note: DiClemente incorrectly tallied second-quarter DBS subscriber growth at 135,000. DirecTV (NYSE: T) and Dish Network (NASDAQ: DISH) actually lost 214,000 subscribers. Factoring in this correction, the media and pay-TV companies lost 315,000 subs in the second quarter.)

For its part, Dish Network didn't break out subscriber metrics for Sling TV, but it did factor the new OTT service into an overall second-quarter subscriber loss of 81,000. Another media investment analyst, Craig Moffett, projected Dish's sub losses could have been listed as high as 187,000 had Sling TV not been factored in. DiClemente estimated that Sling TV added 150,000 subs in the quarter. 

He also estimated that Sony's PlayStation Vue added 15,000 customers. 

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