Picture: The stock prices of Netflix, Comcast, and DirecTV from the end of 2007 to the end of 2009. Source is Google.com/finance
Sources in this blog post:
“Netflix: Quarterly Earnings”
http://ir.netflix.com/results.cfm
“Comcast Investor Relations – Earnings”
http://www.cmcsk.com/earnings.cfm
“DIRECTV Inc. – Quarterly Results”
http://investor.directv.com/results.cfm
Question: How has the recession (2008-2009) affected companies’ balance sheets?
Source Summary:
This blog post will be different from many previous ones because, while other posts discuss articles from some outside source, this question calls for an analysis of balance sheets released by companies at the end of quarters. In order to best do this, I did a comparison of several end-of-year (Fourth Quarter) budget sheets for the three largest distributors, Netflix, Comcast, and DirecTV.
Since the recession happened in 2008-2009, the best method of measuring how the three giants were affected is to compare total assets before, in December of 2007, to assets afterwards, in December of 2009. Netflix lost about $61 million during the year of 2008, but it gained $62 million in assets the next year, bringing their net gain to be $1 million. Comcast lost around $664 million in assets during the two-year period, but since its total assets in the end of 2009 completely dominated Netflix $112 billion to $679 million, Comcast is still in a rather well position. DirecTV was unfazed by the recession, gaining approximately $3.2 billion in assets during the two-year period, but it still had less than Comcast with only $18 billion in total assets.
My Analysis:
Overall, the recession barely damaged the three giants of the media distributor industry. While Comcast did suffer losses, they were relatively small given the grand scale of the entire company’s assets, and the company made a quick recovery the following year. This is rather interesting because many other companies from other industries suffered much greater losses, including the most powerful ones, while distribution is still as healthy as ever, if not more so. To put this in analysis, it seems that, despite lower income and less purchasing, the American public does not want to face living without television. Especially curious is that, while entertaining and moderately informative, there are many alternatives to television that are cheaper and healthier, meaning that a non-essential good is surviving better than some essentials. While this trend is unusual, it is good news for investors and the companies themselves, as media is a good which is almost immune to recession.
I was rather surprised, on researching media stock prices over the course of the recession, that so many did not suffer the cataclysmic apocalypse which almost destroyed the rest of the world. One thing I found interesting was that some TV companies started to offer recession packages, scaled-down versions of their normal channel packages for the recently unemployed. Not only does the American public not want to face life without TV, but this arm of media can adapt itself rather well to constraining economic circumstances.
ReplyDeleteFirst of all, in response to Thadius's comment: I would not classify the 2008 recession as a "cataclysmic apocalypse which almost destroyed the rest of the world."
ReplyDeleteSecond, I was just wondering whether those net gains for each of those media giants were actually earning enough to be considered trending positive. In other words: Are the net gains actually consistent with an overall positive trend in net gains? Or is it enough to call a "gain" but not enough to contribute to consistent increases in net gains?