VeryMuchWoke wrote:jfs1000d wrote:VeryMuchWoke wrote:
Over the past 5 years the S&P is up 80%.
20th Century Fox is FLAT
Discovery Communications is down 60%
CBS Corp is up 60% (their beta is 1.36 so this is significant underperformance).
Disney is holding up fine, but that's more than one business, and ESPN just fired a ton of people because subscriptions are down.
Viacom is down 50%.
A lot of these stocks are getting hit hard. If cord-cutting isn't the issue what is your explanation?
Look at Dish. Why do you think they are willing to cannibalize their own subscribers with Sling TV, at a lower price point? They are doing just what Caveman said, adapting. This is why I said "The best the big companies can do is make pirating a little less convenient than legitimate sources, and then charge a slight premium for that convenience." This is exactly what the cable companies are doing when they move into online streaming - they'd rather have a $20/month customer than no customer at all and young people would rather shell out $20/month then have the hassle of finding pirated sources for each of their shows online.
Cord-cutting is a major problem for these companies. My parent's are in their 60's and 70's and they're totally happy giving up the old technology and consuming all their video from a fire tv, so imagine how bad it's going to be in 20 years when the entire market grew up with computers.
My explanation is content is king. I know what I am talking about this realm, looking at the sell side ratings of DIS.
Netflix, Amazon, Hulu, and other content producers are the kings of media going forward. Not the distributors.
For media companies with valuable content holdings, how has their stock done. Look at the multiples of Netflix and Amazon (yes retail and AWS are a big part, but they woulnd' tbe in media if they weren't robust on it).
Cord cutting has had a tremendous affect on the industry. It is destroying the base for linear cable networks. And, if you have content that isn't must have, such as Viacom, you are going to get killed. For as much as ESPN has had the stupid non-investor types yell gloom and doom, why is disney still growing?
Right now, ESPn is in a shift from a customer base that was bundeled to unbundling.They still own the most valuable sports properties in the world and they have a delivery mechanism and are a must-have for any skinny bundle that wants to get off the floor. When you factor that in, and their purchase of BAM that will develop a state of the art streaming service, then you see where they think their business is going.
There is a floor for sub losses. They were at 100 million, and they may soon find themselves at 75 million. The company isn't going to zero subs. So, we have to stop looking at Fox's Clay Travis as some guy who knows what he is talking about.
The linear networks are in trouble, especially ones that don't produce must-have content. The old days was all you needed was to get carriage on a bundle and it didn't matter what you produced. Now, you need to have good stuff.
no one like to play for content, but people pay for Hulu, Amazon, netflix, spotify etc.
Hmmm. The reason is those companies deliver great content how the consumer wants it. If you are watching netflix shows pirated, I guess that is OK. But the service is flat out worth the $10 a month.
TV networks are in trouble. Media companies that produce great content, they can write their own meal ticket.
The high multiples just prove my point. Amazon and Netflix have high multiples because they are growth stories (note that they are growing revenues, at an amazing rate but earnings not so much).
Here are Netflix's Earnings (Revenue) over the last 5 years:
17M (3.61B), 112M (4.37B), 267M (5.5B), 123M (6.78B), 187M (8.83B).
Here are the net profit margins:
.5%, 2.5%, 4.9%, 1.8%, 2.1%
Why do you think they operate with these razor thin margins? It's because that's all they can charge. When they up prices they lose subscribers. Why? Because a huge segment of their customer base knows how to torrent every bit of exclusive content they have. When they cease to keep up their impressive revenue growth that PE ratio is going to come crashing down and the stock is going to be worth 1/10th of what it is now.
Content is king only in the sense that it's not completely antiquated like distribution, not in that it yields great gains.
Now you can make the argument that content production costs are more of a capital expense than an operating expense, but as far as capital goes most content has a short shelf life so I'd be hesitant to capitalize a whole lot of those expenditures.
Look at Netflix's multiple. They are purchasing everything under the sun.
How much are they spending on content? The operating margins are immaterial.
The stock is at $192 a share. The 52-week low is $92. It has doubled in 52 weeks and the P/E ratio is 240.
What business gets a 240 multiple? The NOE is meaningless. They aren't cutting Expenses at all. The growth is exorbitant. Especially for tech companies, it's about explosive growth., not profit margin.
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