Is it time to short big corporate media?
with that denomination I'm referring to Newscorp, Viacom, Time Warner, Disney, CBS and GE, which control approximately 90% of the US media.
Why? Well, because other than Hillary, they were the big losers of the recent election.
In general their audience has been declining for a while, due to people prefering the more variagated panorama offered by the internet; their overwhelming support for Hillary and the election's outcome was a big blow to their credibility however which I believe will accelerate the trend.
The new strategy of slandering alternative media as fake, when their own reputation has been tarninshed already will hardly do any good.
GE obviously has a ton of other operations outside media, so in that respect they are relatively safe. The rest however I believe are going to suffer.
What do you guys think?
After agreeing with a lot of WSO users on the current state of mainstream media in regards to specifics like Trump, Brexit and now this fake news bull shit. I am really interested to hear what some of the opinions are of shorting mainstream media outlets.
I thought it would be interesting to have a look at the S&P 500 media industry index. Obviously not all media companies on the S&P are mainstream outlets you mentioned, however I take it they are a sizeable majority.
https://www.google.com/finance?cid=12867791
So when Brexit happened on the 23rd June, the media index went from 592.6 down to 564 on the 28th, however the index later recovered to pre Brexit levels on the 5th of July. More interestingly when the US election was won by Donald (8th of November), the media index was at 590 and currently the media index is at 630. Now the positive reaction of the SP 500 media industry index to the Trump victory could be the promises of lower cooperate tax rates and less regulation on business. Really don't know with this one.
Good point. Though if they don't recover in credibility and quality of their product they aren't going to get viewers back and sooner or later that is going to show up in their accounts. Yes lower taxes might give a better look to their profits in the immediate and slow down the decline, but if that doesn't translate in improvement of the product, then it'll be a swan song.
The S&P index growth can be misleading as it's people throwing around money making bets, before the losing bets are cut off.
I was starting to suggest what your saying in being the false hope in the short term with lower taxes etc and agree long term I would short Mainstream media outlets however I think mainstream media still has a little bit left in the tank. Kind of related to your last point is my prediction on a top down level is that when the Fed increases interest rates the mainstream media companies will be hit the hardest. Down to the fact that stock holders of these mainstream media companies know full well how mainstream media is a basket case in the long term and this will give them the perfect catalytic event to dump their stock resulting in a massive crash of mainstream media stock.
Media has been a popular short among hedge funds for a year now and those dynamics are fairly well known, and as a result the companies valuations have come down significantly and those same funds are looking at them as longs or consolidation/SOTP plays
Some of your information is dated. GE sold NBC to Comcast years ago. Time Warner can't be short because it has received a bid from AT&T far above the trading price today so unless you think that deal does not go through it would not make sense to short it. CBS and Viacom may work but they are also going to announce a merger at some point (though to combined entity will likely be a decent short). Disney has been a favorite short for a while but half of their business are other lines like consumer products and parks which are not affected by cord cutting or shaving. That leave Some FOX which is very cheap on earnings especially when you exclude the Indian assets so that is a tough one as well
Well, I'm a newbye after all.
But yes, I'm aware of the AT&T bid for Viacom; while it makes sense to move away from tv, the quality of the product remains what it is so a lot will depend on whether AT&T can do to change that; I'm just very skeptical about it, regardless on whether the acquisition will go through. Why? Because AT&T brings with itself the same big corporate culture that right now has made big media this bad. Extreme political correctness, urban upper class vision of things which online is already oversaturated by sites like buzzfeed, vox and similar.
The booming audience is elsewhere, and the demand is for alternative visions.
As for GE you are correct, my bad. I'd actually add Comcast to the list of potential good shorts.
Thank you. I mean Jesus Christ at least do a little due diligence before you pitch an idea. There's a huge difference between Disney and Viacom.. What makes you think a Viacom merger will happen? Last time I checked the balance sheet didn't look that great and who would want the shitty content assets they have.. Might be something in Paramount and Nickelodeon but wow they really ran the entire MTV division into the ground.
As wso_user noted above, its been time to short traditional media. This particular election or credibility gap vs. alternative media ( a lot of it is crap) is irrelevant. Its simply a question of time spend/ eyeballs moving to the internet (increasingly mobile internet) while the media space becomes more crowded.
Hard to comment on a general thesis like this and not sure any of the names you mentioned are particularly attractive shorts right now (for many idiosyncratic reasons), but there will continue to be many opportunities to short specific media companies. I'd focused on the most leveraged to U.S. traditional TV (e.g. less international, less sports) and be careful about special sits (e.g. Viacom/CBS potential merger).
OP, you are over-weighting the effect of the election on their credibility. Everyone knows the media has innate bias, so there really has been no (substantial) loss in credibility. The smart people already know this (no change), and the others simply don't care. Anecdotally, I don't know anyone who has fallen out of love with their favourite media outlet due to the election outcome. There has been no backlash.
More important is the fundamental changes affecting this industry. In a word, technology. The barrier to entry has become very, very low, and the consumer preferences have changed substantially.
So I think SNI/DISCA probably fit your short criteria, but both are very cheap. What do you think about sports over the next couple of years? The NFL ratings weakness has gotten a lot of recent publicity, I am wondering if this is the tip of the iceberg. Broadcasters are paying more and more for 5-10 year rights to sporting events. Based on what? This is the last bastion of mass/live viewing? Not sure I buy that argument.
Mass/live viewing will be figured out digitally right? FB/GOOG have many many more eyeballs. The agencies and their clients - and FB/GOOG themselves - are just now figuring out how to broadcast to those eyeballs. Sports will continue to attract the largest TV audiences, but the NFL this year has shown us that nothing on TV is sacred. Curious to hear your thoughts on this?
Short traditional media - long content providers (like Warner Brothers before AT&T deal), as they will probably be beneficiaries of the various streaming services/ traditional media engaging in price wars to get the best content. DIS is a different story as it is an amalgam of gaming & leisure (resorts/ cruises/ Disneyland), content providing (Disney movies, marvel, star wars, etc.), & traditional median (ESPN & ABC), I would stay away from shorting them.
Not a fan of DIS either, though their numbers are better. Cinema ticket sales are declining as well, just not as fast as tv. ESPN numbers are also declining, especially when it comes to football. October 2016 was their worst month ever in terms of lost subscriptions. http://www.outkickthecoverage.com/espn-loses-621-000-subscribers-worst-…
The reason is still primarily the same, online is cheaper for both movies and sports.
As far as the AT&T/Warner deal, I'd go long before it, short after it. I really don't see them rejuvanating the product atm.
Sounds like you're less interested in media and more interested in telling us about how great Trump is.
Bad reason for a short (as others noted, this does not mean the short itself is a bad one). Think about it this way: NYT/WSJ blow their election coverage. What happens next? We all rage about how stupid/wrong they were, then login in to their site to read about 'what went wrong' or what 'needs to change'. They're selling ads either way.
There's a big distinction between news media and the companies you list. Regardless of whether you are bearish on news media or not, these companies will likely be more affected by streaming/cord-cutting/shaving/nevering than any shift in news consumption preferences.
Just another nail in the coffin... I think it is pretty clear that if it was anything beyond stupidity mania among "journalists", the drumming up of all this fear and controversy was an attempt to sell copies and send viewers tuning in.
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