Shares in Chinese online video giants Youku and Tudou took a dive this week as the Beijing government cracks down on online video with stricter regulations. The new laws will require Internet video providers to pre-screen all programming before making it available.
The stock of U.K. TV giant ITV fell more than 5 percent in early Friday trading, with observers saying it was hit after two tough days for U.S. entertainment stocks.
As of 10:30 a.m. London time, the stock had recovered somewhat and was down 3.7 percent at $4.06 (£2.618).
U.S. sector stocks have been hit by concerns about the future of the cable business after Walt Disney this week reduced its growth guidance for ESPN and some on Wall Street highlighted ratings and advertising weakness and cord-cutting risks.
“Read-through from the U.S. is overdone,” Liberum Capital analyst Ian Whittaker said about ITV’s performance on Friday in a note to investors.
He said the stock was “down today on the read-across from U.S. media names that have got smashed in recent days” plus “a negative spin being put on some of the data” from an annual report by U.K. media regulator Ofcom.
“This is a good buying opportunity,” Whittaker said, reiterating ITV as his top stock pick in the sector with a “buy” rating. He highlighted “several reasons why the negative read-acrosses are overdone.”
First, he said that the U.S. TV market was “very different” from the U.K. and Europe as “channels show a lot more advertising, giving consumers a big incentive to switch off especially given the high cable fees.” Whittaker said U.S. networks have also been “awful at developing affiliate channels to capture fragmentation,” while European companies have been “very good.”
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Plus, in the U.S., there is a “greater degree of channel fragmentation,” while in the U.K., more than 60 percent of viewing on pay TV provider Sky is still focused on the five main channels, the analyst said.
In terms of the Ofcom report, he said data showed that TV was “still very strong and changes are incremental, not sharp drops.” For example, minutes spent watching TV per day in 2014 came in “barely below 2009” at 220 versus 225, said Whittaker.
