TGIF! March 13, 2015

The Media & Entertainment industry has experienced a major shift in how content is delivered.  For years, it was the big 3 broadcasters, a handful of local channels, the newspaper and the phone company. This model lasted for decades, until Ted Turner, my old boss, took cable television to new levels, and created 24/7 news. The advancement of the internet was an even bigger development, which created a new medium for people to access information.  In the 90’s, we needed a phone line for the web, then a fatter cable brought faster access.  Today, newspapers are considered dinosaurs, the phone company is no longer the phone company, cable operators are fighting to keep the living room, iPad’s are televisions to teenagers and wires are no longer needed.

The pace of innovation is unprecedented, and Hollywood is still trying to figure out how best to use it.  The term “Content is King” still applies.  Those that create the content that consumers want and are willing to pay for will always win.  So who are today’s dominant Media and Entertainment companies?  No question, Disney and CBS are the strong traditional media titans, and are proving their savvy in the digital world.  But they find themselves competing with the likes of Facebook, Netflix, YouTube and even Amazon for content, though they’re also partners at the same time.  Media has become social, and individuals can create their own content and distribute it around the globe for virtually nothing.  Competition for consumer attention is fierce. Not all content is worth paying for.

Disney has been riding high with a treasure trove of characters and content that consumers can’t get enough of.  Its acquisitions of Pixar, Marvel and Lucas over the years are paying off big time.  It’s not just in the box-office either.  The successful films are also translating into toys and games and other merchandise, not to mention the theme parks.  Disney just announced it’s now working on a sequel to the smashing success film Frozen as well as more Star Wars films on the way, with the next one coming for the holidays.  Disney continues to create what a large population wants. Speaking of what the masses want.  Did you know that ESPN alone accounts for over 40% of ALL of DISNEY’s revenues?  Throw in the Disney Channel with ESPN and they account for nearly 60%.  Their purchase of CapCities (the bundled ABC / ESPN contingency) back in 1996 has proven to be a phenomenal investment.

This week I visited the west coast headquarters for CBS in Studio City.  America’s “Most Watched Network” has been savvy and nimble in how they distribute their proprietary content.  CBS invests a lot of money in their studio craft, and expects to get paid for it in return.  They are.  CBS consistently dominates primetime.  However, people aren’t always watching shows live anymore and often skip through commercials.  In response, CBS embraced the web as a new medium for its content, which can be found anytime, anywhere with its all-access program.  The network no longer relies solely on advertisers for revenue.  The CBS library is wide open on the web for current shows like The Big Bang Theory as well as their classics like I Love Lucy.  It’s remarkable, 5 decades after it went off the air, Lucy still generates cash.  The company views new participants, like Netflix and Amazon, as “frienemies” (friends and enemies) because they provide a new distribution channel on the web for coveted CBS content, but they’re also producing their own original content.  Live, exclusive content is still key.  March Madness begins next week.  The Super Bowl is theirs in February.  CBS has figured out the digital age.

Innovation and technological advancement have had a major impact on our lives, and nowhere is it more obvious than in the Media & Entertainment industry.  It’s a focal point in our investment strategies.  It’s also a focus for our firm.  We’ve embraced it with our own information dissemination.  Our new website, new logo and video productions reflect it.  With the help from a savvy crew in Marina Del Rey, we have hit the digital age running full speed, and plan more video and audio broadcasts and more frequent Market commentary for those that crave it.  We’re 40 years young, and our best days are ahead.  Mark May 29 on the calendar.  Stay tuned.

Enjoy the weekend.  We’ll be back, dark and early on Monday.

By: Mike Frazier

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