IT'S A HORSE RACE; INVESTORS UNCERTAIN ABOUT FUTURE OF MEGAMEDIA EMPIRES.Byline: Dave McNary Staff Writer As the smoke has cleared in the month since Viacom Inc. and CBS (Cell Broadcast Service) See cell broadcast. Corp. stunned the financial world with their $35 billion merger, investors are still grasping for answers. In short, does it still make sense to own part of one of the world's megamedia empires - The Walt Disney Co., News Corp., Time Warner Inc. and the new Viacom/CBS - at a time when instability rules? What companies will survive amid the prevailing climate of ``eat or be eaten?'' The answer, according to analysts and trackers, is fairly simple: Buy them and hang tough. They warn investors not to expect short-term gains similar to the Internet darlings of Wall Street but stress that the giants have a rock-solid long-term outlook. Each has taken significant hits in the bull market, but even the current worst performer, Disney, is up 35 percent over the past four years. During that period, News Corp. has gained 42 percent, Viacom is up 80 percent and Time Warner - a Wall Street dog only a few years ago - has rewarded investors with a gain of 246 percent. For many who follow the media business, the buyout of Mel Karmazin's CBS by Sumner Redstone's Viacom is an endorsement of the notion that major players will survive and thrive amid the rapidly consolidating entertainment business. ``If I were a small guy, I'd look at where these companies are going to be in five to 10 years,'' said Steven Cesinger, head of media research at Greif & Co. ``In today's marketplace, people are so focused on the next quarter, but if you're picking a good tent pole investment in the sector, you should keep in mind that companies like Disney and Viacom are going to run every form of electronic media over the next century.'' Cesinger attributes his bullishness to expected declines in distribution costs, thus making it simpler to get more movies and TV programs into more markets. ``They're going to be able to get more bang for the buck on a global basis,'' he said. Investors face a daunting daunt tr.v. daunt·ed, daunt·ing, daunts To abate the courage of; discourage. See Synonyms at dismay. [Middle English daunten, from Old French danter, from Latin challenge, however, as the urge to merge rises. They need to answer two questions: Can the media giants continue to pump out profits amid the massive distraction of making more deals? And which companies will remain dominant and which will be the 21st century equivalent of the eight-track tape? And there's not much time anymore for analysis and wait-and-see reactions. After all, the CBS/Viacom deal did not have a long gestation. It was triggered by a Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. decision in August to lift the ``duopoly'' ban that prohibited a single person or entity from owning more than one TV station in a market. ``The fact that the CBS-Viacom deal got done so quickly got everyone's attention,'' noted Linda Bannister, an entertainment analyst with Edward Jones. Three weeks later, radio giants Clear Channel and AMFM AMFM Association of Marriage and Family Ministries AMFM Automated Mapping Facilities Management AMFM Association des Modélistes Ferroviaires de Montréal (French: Montreal Railroad Modelers Association) agreed to merge in a $23 billion deal; possible new targets include NBC NBC in full National Broadcasting Co. Major U.S. commercial broadcasting company. It was formed in 1926 by RCA Corp., General Electric Co. (GE), and Westinghouse and was the first U.S. company to operate a broadcast network. , Sony Corp.'s entertainment operations, Paxson Communications, USA Networks, Tribune Co., Sinclair Broadcasting and Young Broadcasting. ``If you have horizontal integration, you can control your destiny and costs,'' Bannister added. ``The networks don't want another `ER' on their hands.'' In that landmark 1998 deal, Warner Bros. was able to boost NBC's per-episode fee for ``ER'' from $2 million to $13 million amid speculation that Rupert Murdoch was willing to pay even more to get the medical drama on Fox. So what should an investor keep in mind when deciding on whether to take a ride on the megamedia express? Here's what leading entertainment industry analysts say: ``Investors need to focus on the long-term,'' said Barry Hyman, an entertainment analyst with Ehrenkrantz King Nussbaum. ``Stocks like Time Warner have had magnificent three- and four-year runs. Now it's time for them to grow into their valuations.'' Consider that the stock already has been bid up on deal speculation. ``There's tremendous consolidation coming in the industry so a lot of the media stocks have gone up dramatically because of the focus of Wall Street on the mentality of `eat or be eaten,' '' said Marvin Roffman of money manager Roffman Miller Associates in Philadelphia. Keep in mind that there will be bumps along the way. ``We're buying Disney because it's been shot down too much so it's a great long-term investment,'' Roffman said. ``But I must tell you that I don't know where the market is going short-term, and neither does anyone else.'' Look for a fully integrated company. Wall Street trackers believe that the megamedia empires - offering the combination of TV networks, movie studios, radio stations, publishing and Internet - offer an unbeatable combination with enough different media niches to attract revenues from every single demographic sector. ``I still think there's value in the large-cap players,'' said Prudential Securities analyst Katherine Styponias. ``I'm very optimistic about the continued fractionalization of the market and the ability of those players to draw the most eyeballs.'' Keep in mind that the companies are global players. Part of Styponias' bullishness comes from Hollywood's track record in producing movies and TV shows that connect with foreign customers. ``Internationally, there is a lot of upside ahead of us, if you look at the penetration in cable TV and home video,'' she said. ``U.S. entertainment product is by far the highest in demand around the world. We've done an excellent job of exporting our culture to overseas markets, so there's still a lot of room for growth.'' Bannister said the media empires are well-positioned for growth. ``Clearly, these companies are going to benefit from international and technological advances,'' she said. ``With choices becoming more fragmented, it comes down to brands.'' Pay attention to the Internet businesses. Analysts believe the explosive growth of the Internet will further increase the value of brand names like Disney, MTV MTV in full Music Television U.S. cable television network, established in 1980 to present videos of musicians and singers performing new rock music. MTV won a wide following among rock-music fans worldwide and greatly affected the popular-music business. , Sports Illustrated and Fox. ``In a million-channel universe, you want to have the advertising muscle to get people to find you,'' Cesinger said. ``(People) are basically lazy - we don't want to have to hunt through 100 Web sites to find something.'' The Internet's growth could be a particular boon to Seagram, now the world's largest music company. ``The ability to download music from the Web and make your own CDs is going to be very attractive to baby boomers, who don't want to dig through a stack of CDs to find what they're looking for,'' Bannister said. Keep in mind that these companies pay heavily for perceived mistakes even if they eventually turn out right. Time Warner shares were depressed for much of the decade partly due to Gerald Levin's now-vindicated strategy of expanding cable assets. Disney has now become a favorite Wall Street whipping boy. Shares have fallen more than 40 percent since hitting an all-time high in May 1998 on a variety of concerns - ABC ABC in full American Broadcasting Co. Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. , home video, retail sales and Chairman Michael Eisner's bitter court battle with former studio chief Jeffrey Katzenberg. ``Disney is under a tremendous amount of pressure for its current quarters,'' said retail consultant Frederick Marx. ``Right now, the stock has such an institutional following with all the others doing so well. So their star is not as bright as it once was.'' That's meant Eisner has had to cut costs and jettison fledgling operations, such as Club Disney and the ESPN ESPN Entertainment and Sports Programming Network Stores. ``The stock doesn't have real window dressing appeal right now, and Wall Street needs to see management moving to change that,'' Marx said. ``Eisner would not be criticized so much now if he had not been such an achiever earlier. The benchmarks for payback on their investments have been raised.'' Strongly consider the smaller alternatives. Analysts note there is always a danger that the corporate behemoths are so large and diversified that they cannot compete effectively against smaller, more nimble rivals. ``My suggestion would be to bypass the large-cap media companies because there is the danger that they will suffer from the mentality of focusing on the power of size and concentration of capital,'' said entertainment analyst Kevin Skislock of Laguna Research Partners. ``It's not that this kind of thinking will destroy these companies, but it can lead to missed opportunities.'' Instead, Skislock believes, investors need to focus on companies that can merge new technologies with creative capabilities such as Pixar Animation. Next month, Pixar is releasing with Disney ``Toy Story 2,'' the sequel to the companies' hugely successful animation project. Remember that the megamedia empires are different and are likely to stay that way. ``Each has a distinct strength,'' Cesinger said. ``Rupert Murdoch, Mel Karmazin and Sumner Redstone are entrepreneurs, while Disney has a brand franchise that's quite unique. I see them trying to compete less head to head where there's less of a competitive edge. In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke" put differently , I would not expect to see Disney trying to start its own MTV.'' Make certain there's a plan. ``I'm looking for companies with a total strategy, and that includes the Internet because you have to be a better-known brand to compete,'' Hyman said. ``When all is said and done in the media world, the names are still going to be Disney, News Corp., Time Warner and Viacom and companies like Young Broadcasting are going to be gobbled up.'' Focus on the leadership. ``The single most important factor is the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. ,'' Skislock said. ``I've been doing this for 25 years, and I've seen companies with the best products get left behind and companies with me-too products become industry leaders because of execution. The business landscape is strewn strew tr.v. strewed, strewn or strewed, strew·ing, strews 1. To spread here and there; scatter: strewing flowers down the aisle. 2. with the carcasses of large dominant companies that did not change with their customers.'' THE WALT DISNEY CO. Chairman: Michael Eisner Headquarters: Burbank 1998 revenues: $22.9 billion Holdings: Theme parks: Walt Disney World Noun 1. Walt Disney World - a large amusement park established in 1971 to the southwest of Orlando Orlando - a city in central Florida; site of Walt Disney World ; Disneyland parks in California, Paris and Tokyo; Epcot; Animal Kingdom Trademarked characters: Include Mickey Mouse, Donald Duck, Winnie-the-Pooh, the Lion King, the Little MermaidTV networks: ABC Network, 10 TV stations, ESPN cable channels, the Disney Channel, A&E, Lifetime Film: Walt Disney Studios The name Walt Disney Studios may refer to:
TV production: Includes ``The Drew Carey Show'' and ``Once and Again'' Regional entertainment: More than 720 Disney Stores; Disney Cruise line Disney Cruise Line is owned by The Walt Disney Company and headquartered in Celebration, Florida. The business is run by President Tom McAlpin as part of the Walt Disney Parks and Resorts division. ; ESPNZone and DisneyQuest chains Sports teams: California Angels and Mighty Ducks Internet: Go Network and Infoseek Publishing: Hyperion books; Discover, ESPN and Los Angeles magazines Strengths: Theme parks, brand names, cable, animated films, synergy Weaknesses: ABC, retail operations, sports teams VIACOM/CBS Chairman: Sumner Redstone Headquarters: New York 1998 revenues: $18.9 billion if merged Holdings: Television: CBS network; 34 TV stations; Nickelodeon, Comedy Central, Sundance, MTV, TV Land, VH1, Nashville, Noggin nog·gin n. 1. A small mug or cup. 2. A unit of liquid measure equal to one quarter of a pint. 3. Slang The human head. [Origin unknown. cable networks; 50 percent of UPN UPN User Principal Name (Microsoft Windows 2000) UPN United Paramount Network UPN Unión del Pueblo Navarro (Navarrese People Union) UPN Umgekehrte Polnische Notation network; pay TV channels Showtime, Flix and the Movie Channel Radio: Network of more than 160 stations through Infinity Broadcasting Film: Paramount Studios TV production: Paramount TV, Eyemark, Spelling, Viacom and King World Theme parks: six Paramount amusement parks Publishing: Simon & Schuster Simon & Schuster U.S. publishing company. It was founded in 1924 by Richard L. Simon (1899–1960) and M. Lincoln Schuster (1897–1970), whose initial project, the original crossword-puzzle book, was a best-seller. Retail: More than 6,000 Blockbuster video stores, 650 screens at 109 Famous Players theaters in Canada Internet: CBSmarketwatch.com, mtv.com, nick.com Strengths: Cable, radio, cross-promotion potential Weaknesses: Older demographic for CBS, dependence on ad revenues TIME WARNER INC. Chairman: Gerald Levin Headquarters: New York 1998 revenues: $26.8 billion Holdings: Television: Cable networks TBS, TNT TNT: see trinitrotoluene. TNT in full trinitrotoluene Pale yellow, solid organic compound made by adding nitrate (−NO2) groups to toluene. , CNN CNN or Cable News Network Subsidiary company of Turner Broadcasting Systems. It was created by Ted Turner in 1980 to present 24-hour live news broadcasts, using satellites to transmit reports from news bureaus around the world. , Cartoon Channel, Home Box Office; half ownership of the WB Network; cable systems covering 15 million homes TV production: Including ``Friends'' and ``E.R.'' through Warner Bros Film: Warner and New Line Cinema Trademark characters: Looney Tunes characters This is the complete list of Looney Tunes characters organised after the year of their first appearance. Note: The more famous or noteworthy Looney Tunes characters are listed in bold. , including Bugs Bunny, Daffy Duck, Tweety Bird and the Roadrunner roadrunner or chaparral cock Either of two species of terrestrial cuckoo, especially Geococcyx californianus (family Cuculidae), of Mexican and southwestern U.S. deserts. About 22 in. Publishing: Time, People, Fortune and Sports Illustrated Sports: Atlanta Braves and Atlanta Hawks Music: Including Warner, Elektra, Atlantic labels Internet: Hubs for sports, news, entertainment, business and women's issues Strengths: Cable, publishing, TV production Weakness: No TV network, large debt load NEWS CORP. Chairman: Rupert Murdoch Headquarters: Sydney, Australia 1998 revenues: $13.6 billion Holdings: Television: Fox Network, satellite broadcasting networks such as BSkyB and Star TV; cable networks Fox Sports, Fox News, Fox Family Channel, Health Network, and FX; Fox-owned TV stations Film: 20th Century Fox and Fox Searchlight Sports teams: Los Angeles Dodgers "Dodgers" and "Brooklyn Dodgers" redirect here. For the American football team, see Brooklyn Dodgers (football). For the Eastern Basketball Association team, see Brooklyn Dodgers (basketball). baseball team and National Rugby League
Publishing: Dozens of newspapers, including the Times of London, the Sunday Times, News of the World, The Australian, and the New York Post The New York Post is the 13th-oldest newspaper published in the United States and the oldest to have been published continually as a daily.[3] Since 1976, it has been owned by Australian-born billionaire Rupert Murdoch's News Corporation and is one of the 10 ; HarperCollins and Zondervan book publishers; TV Guide and the Weekly Standard Strengths: Appeal to young demographic, synergy Weakness: Heavy investments in start-ups, occasional buying frenzies WATCH THESE PLAYERS he Viacom-CBS deal has boosted scrutiny of the media-entertainment sector, where many more mergers are expected: NAME TICKER REVENUES x COMMENT Cablevision Systems CVC See CSC. $3.77 billion Solid sports, cable presence Clear Channel Communications Not to be confused with clear channel radio stations, which are AM radio stations with certain technical parameters. Clear Channel Communications (NYSE: CCU) is a media conglomerate company based in the United States. CCU CCU abbr. 1. coronary care unit 2. critical care unit CCU critical care unit. CCU Critical care unit, see there $1.35 billion Dominant radio player following AMFM deal Cox Communications COX $1.72 billion Attractive cable, broadband holdings Gannett GCI GCI Ground Circuit Interrupter GCI Getty Conservation Institute GCI Global Commerce Initiative GCI Green Cross International (non-profit international environmental organization) GCI Growth Competitiveness Index GCI Great Cities Institute $5.12 billion Huge newspaper holdings, some TV General Electric GE $99.82 billion May be willing to sell NBC Metro-Goldwyn-Mayer MGM MGM in full Metro-Goldwyn-Mayer, Inc. U.S. corporation and film studio. It was formed when the film distributor Marcus Loew, who bought Metro Pictures in 1920, merged it with the Goldwyn production company in 1924 and with Louis B. Mayer Pictures in 1925. $1.24 billion Library, James Bond franchise still attractive Paxson Communications PAX $134.1 million ``Weblet'' will be 32 percent owned by NBC Pixar Animation PIXR $14.3 million ``Toy Story 2'' should lift volatile stock Seagram Co. VO $9.71 billion Much expected from music, Universal improving Sinclair Broadcasting SBGI SBGI Society of British Gas Industries $736.1 million TV stations likely to draw suitors Sony Corp. SNE SNe Supernovae (astronomy) SNE Sony Corporation (stock symbol) SNE Syndicat National de l'edition (French Publisher's Association) SNE Society for Nutrition Education $51.18 billion Lack of network may drive entertainment sale Tribune Co. TRB TRB Transportation Research Board TRB Technical Review Board TRB Teacher Registration Board TRB Test Review Board TRB Total Relationship Balance TRB Tap-Rack-Bang (shooting procedure) TRB Theodore Roosevelt Building $2.98 billion Often mentioned in deal rumors USA Networks USAI USAI United States Army Intelligence USAI United States Association of Immigrants $2.63 billion Diller expected to make deals Young Broadcasting YBTVA $277.1 million Dozen TV stations include KCAL x Fiscal year 1998 SOURCE: Daily News research CAPTION(S): Photo, 2 Boxes Photo: (Color) no caption (Horse races) Box: (1) POST POSITIONS (See text) (2) WATCH THESE PLAYERS (See text) |
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