1
The Future of
Media
Laura Martin, CFA
Needham & Company, LLC
May 2014
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Coverage Overview
Offline
Online
Content:
Where +Are
We Tod
ay? A Unique Seat
LAM Coverage Universe
Online Content
Offline Content
AOL
CBS
Bankrate
Discovery
Demand Media
Disney
Facebook
Madison Square Garden
Netflix
21st Century Fox
Pandora
Scripps Networks
TripAdvisor
Time Warner
Yahoo!
Viacom
World Wrestlng Entertainment
TV-Content Related
Nielsen
Synacor
Time Warner Cable
Source: Needham & Company, LLC.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
2
3
Speaking Overview
Discussion
Where Are Agenda
We Tod ay?
Source: PWC
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Media Trends: Newspapers
Newspaper
Trends
Where
Are We Tod
ay?
4
March 2014 Data:
• Unique monthly visitors
to newspaper sites rose
19% y/y to a record
161mm (ie, 66% of US
adults) in 3/14.
• Average time spent: 1.1
minutes per day vs 33
mins of social media,
3.6 search, and 3.8 for
each of Yahoo News,
NBC News, BuzzFeed
and CNN
FY13: Newspaper digital
ad revenue grew 2% vs
17% total online ad rev.
Source: Newspaper Association of America
PRIVATE & CONFIDENTIAL
Source: comScore
LMartin@NeedhamCo.com (917) 373-3066
RadioAre
Trends
Where
We Tod ay?
Media Trends: Radio
5
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Television
Trends
Media Trends: TV
Consumer
Where
Are We Demand
Tod ay?
Source: Nielsen Cross Platform Report, March 2014.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
7
Digital Video Trends
8
2 00 ,0 0 0
50,000
Videos Watched (mm)
People Streaming (000)
Media Trends: TV
# P e o p le S t r e a m in g V i d e o s O n l in e
# V id e o s W a t c h e d O n lin e
In Dec 2013,
188mm
Americans
watched
50B online
content
videos
vs 182mm and
39B in Dec
2012.
Source: comScore
0
0
1 /1 /0 7
1 2 /1 /0 8
2 /1 /1 0
2 /1 /1 1
1 /1 /1 2
Structural Problems that Limit Online Video Demand & Economics
Demand Issues
• Discovery is Difficult Online
• Stickiness Poor (ie, Short-form)
• Content Quality Uneven
• UGC vs Premium
• Scares Branded Advertisers
Economic Challenges:
• YouTube “Tax” - 45%
• Online Ecosystem Pays for Hits ONLY
• Niche Audiences Commoditized – No Pricing Power
• No Standardized Measurement for ROI
• Complex for Advertisers to Purchase
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Is it the Platform or Programming that Skews Old?
Media Trends: TV
Sample CBS Programming: Online vs Offline
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
9
10
Bundling Doubles Revenue
MultiTelcos/
channel Current Satellite/
HH
Price/ Cable Per
(mm) Month
Month
Economics: TV
1
2
3
4
5
6
7
8
9
10
11
12
13
14
1
2
3
4
5
6
7
8
9
1
2
3
4
5
6
7
8
NWSA
NewsCorp subscriber fees
at "bulk rates"*
Fox Broadcast Channel
100
Fox News
97
95
FX & FX HD
National Geographic Channel
HD & National Geographic
69
SPEED HD & SPEED
73
Big Ten Network HD & Big Ten
70
Network
50
Fox Reality Channel
91
FSN
50
12 O&O regional sports nets
50
FUEL TV
Fox Movie Channel
50
FOX Soccer Channel
50
FOX Panamerican Sports
50
50
FOX College Sports
NWSA Sub Revenue/Month
Disney subscriber fees at
"bulk rates"*
ABC Broadcast Channel
Disney Channel
Playhouse Disney
Disney XD-Toon Disney
ABC Family - formerly Fox
Family & The Family Channel
BVS Entertainment - formerly
Saban Entertainment
Jetix Europe
Hungama
SOAPnet
Total Disney Channels
ESPN, Inc.
(Disney 80%, Hearst 20%)
ESPN and HD
ESPN2 and HD
ESPN Classic
ESPNews and HD
ESPN Deportes
ESPNU
ESPN Now
ESPN Plus
Total ESPN
Disney Sub
Revenue/Month
$0.80
$0.25
$0.30
($mm)
$80
$24
$29
$0.20
$0.25
$14
$18
$0.25
$0.05
$1.00
$0.50
$0.20
$1.00
$0.20
$0.10
$0.10
$5.20
$18
$3
$91
$25
$10
$50
$10
$5
$5
$381
100
98
50
74
$0.80
$0.75
$0.25
$0.15
($mm)
$80
$74
$13
$11
98
$0.50
$49
20
50
20
73
$0.15
$0.15
$0.15
$0.25
$3.15
$3
$8
$3
$18
$258
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
VIAB
Viacom subscriber
fees-"bulk rates"*
Comedy Central
Nickelodeon
MTV
MTV2
VH1
VH1 Classic
BET
BET J
Logo
Spike
Nick@Nite
TeenNick
Nick Jr
TV Land
CMT
Nicktoons
VIVA
TMF
Palladia
Viacom Sub
Revenue/Month
Multi- Current
Telcos/
channel Bundled Satellite/
HH
Price/
Cable Per
(mm)
Month
Month
98
100
99
77
98
56
90
34
45
99
100
69
71
97
90
55
75
10
20
$0.30
$0.30
$0.30
$0.25
$0.20
$0.20
$0.17
$0.15
$0.15
$0.15
$0.10
$0.10
$0.10
$0.15
$0.15
$0.15
$0.15
$0.15
$0.10
($mm)
$29
$30
$30
$19
$20
$11
$15
$5
$7
$15
$10
$7
$7
$15
$13
$8
$11
$2
$2
$3.32
$256
Lifetime Ent and A&E [JV between Disney (37.5%),
Hearst Corporation (37.5%) and NBC Universal (25%)]
1
2
3
4
5
6
7
8
Lifetime
Lifetime Movie
Lifetime Real Women
A&E Network
The History Channel
The Biography
History International
Crime&Investigation
Total Lifetime Ent
99
72
14
99
98
55
54
20
$0.15
$0.15
$0.15
$0.20
$0.20
$0.10
$0.10
$0.10
$1.15
$15
$11
$2
$20
$20
$6
$5
$2
$80
* Represents the lowest rate because the distributor is
required to carry the channel on the expanded basic
tier (usually 100mm households), unless otherwise shown.
100
$4.50
$450
$7.65
$788
TV Content Bundles
1. Programs are Bundled
into Channels
2. A Channels “Pull” B &
C Channels
3. All Cable, Satellite
and Telcos Must Buy
Bundled Channels
4. Volume Discounts
Based on Size
5. Consolidation begets
Consolidation
Source: Company reports,
Needham & Company LLC
research. 2010 Data.
Sources: Company documents, Needham & Company estimates.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
11
Economics: TV
The Profit Power of the Bundle
Sources: FCC, NCTA, Dr. Scott Wallsten.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Economics: TV
Quantifying The Profit Power of the Bundle
Source: Dr. Scott Wallsten, Needham & Co. research.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
12
Consumer Value Lost Through Unbundling
Consumer Value: TV
1.
Our report entitled “Valuing Consumer Choice” (dated 12/1/13)
Average pay TV household watches 4,400 hours of TV/year
and pays $720 per year ($60/month), or $0.16 per hour of TV
viewed.
Based on average US household income of $51,017/year
(=$5.82/hour), TV costs 3%/hour of what this time is worth to
viewers ($0.16/$5.82).
Average channels viewed remain constant at 18. Therefore,
paying homes rise as the bundle grows.
Bundle facilitates discovery (ie, Duck Dynasty)
90% of total U.S. households pay for 200+ TV channels.
For every $1.00 paid by consumers to fund content creation,
advertisers pay $1.24
Only 56 channels would survive and 124 channels would die
if TV is unbundled
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
13
Consumer Value: TV
Consumer Value Lost Through Unbundling
1. In dollars, we calculate the value destroyed
from unbundling TV includes:
$80-113 billion in consumer value at risk
from loss of channel choice;
$45 billion of TV advertising revenue at risk;
1.4 million jobs at risk;
$20 billion of taxes paid at risk;
$117 billion of market capitalization at risk.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
14
15
Media Questions
What I Think About
1.
2.
3.
4.
Consolidation Implications
Net Neutrality Debate
Ascendency of “Closed” Platforms
Content
WWE: Going Direct at $10/month
DIS/DISH
5. Employees in a Digital World
6. Device Proliferation
Android, iOS, Amazon Fire, Roku, AppleTV
7. Huge Scale & Cash at Internet Companies
Will Google buy a Content Company?
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
Do you have any questions?
If you give me your card, I’ll send you my thematic research
Your Questions
Laura Martin holds a BA from Stanford and MBA from Harvard, as well
as a CFA designation.
Martin’s first job was in media investment banking at Drexel Burnham
Lambert
After the Drexel bankruptcy, she joined Capital Research &
Management, managing $500M of media equities.
In 1994, she joined Credit Suisse First Boston where she was
nationally ranked by Institutional Investor magazine for 4 years
in the cable & entertainment industries.
In 2001, Martin moved to Paris to became EVP of Financial Strategy &
Investor Relations for Vivendi Universal.
In 2003, Martin returned to publishing research on the largest Media
and Internet companies, distributed through Soleil Securities.
In 2009, Martin joined Needham & Company.
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
16
Disclosures
Equity Disclosures
1. The Economic Power of the TV Bundle
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066
17
18
Your Questions
Laura Martin, CFA
Lmartin@NeedhamCo.com
May 2014
PRIVATE & CONFIDENTIAL
LMartin@NeedhamCo.com (917) 373-3066