From the Media Big Six, I’ll Pick Mickey

by Marc Bastow | July 19, 2012 10:15 am

From the Media Big Six, I’ll Pick Mickey

I found myself with some relax time recently and decided to sit back in the recliner and engage in some good old-fashioned channel surfing. Perhaps “old-fashioned” is a bit of a misnomer since the phrase isn’t that old, but you get the picture.

In the course of about 10 minutes, I flipped through my favorite channels looking for a place to land. I checked Showtime and HBO for movies or favorite new shows with no luck, and ran through Smithsonian to try finding something highbrow and informative, but again, no luck.

Flipping furiously past MTV (not a chance) I worked my way to NBC stations both independent and aligned with (at least for a few more days) Microsoft (NASDAQ:MSFT[1]), only to finally give in and settle down for the second half of a pre-Olympics basketball game on ESPN.

That’s when I realized that with the exception of anything Fox-related, I’d run through 5 of the 6 media giants that control 90% of what American’s read, watch, or listen to on a daily basis[2], according to a great infographic from FrugalDad.com[3] that Barry Ritholtz posted on The Big Picture, his economics and finance blog. The infographic shows that these six companies control the viewing habits of 277 million cable or print media subscribers.

In my channel surfing haze, I’d worked through CBS (NYSE:CBS[4]), Time Warner (NYSE:TWX[5]), Viacom (NASDAQ:VIAB[6]), GE (NYSE:GE[7]) and finally Disney (NYSE:DIS[8]). All I missed was News Corp. (NASDAQ:NWSA[9]) … and that was on purpose.

Wow. Trying to make an “investable” decision for InvestorPlace readers on how to play this near-monopoly industry is a bit of a sticky-wicket. Size? Programming? Editorial tilt?

I suspect that one can’t really lose in this, but for argument sake I’ll eliminate GE and News Corp. from the list since GE’s corporate results involve a lot more than just TV. News Corp is out because I just don’t read anything it publishes or watch any of its programming, except, of course, the National Football League.

Viacom programming is for the most part about children, and since mine no longer watch cartoons, I don’t want to follow this stock, either. CBS? Again, football with golf thrown into the mix. So, no.

Which leaves me with my Big Two of the Big Six: Disney and Time Warner.

First off, let’s see what they both have in the way of valuable media properties:

Disney Time Warner
ABC CNN
ESPN HBO
Pixar Studios Time
Miramax Studios Warner Brothers Studio
Marvel Studios

Next we’ll look at some key statistics and measures:

Measure TWX DIS
Market Cap $36 billion $88 billion
Revenues $29 billion $42 billion
Profit $2.8 billion $5 billion
Dividend Yield 2.7% 2.7%
Quarterly Revenue Growth, YOY (10%) 21%
5-Year Stock Performance (39%) 42%
My Favorite Programming Hard Knocks (HBO) Toy Story (Pixar)

Taking into account that Time Warner also has the benefit of a popular magazine, Time, while Disney can only give me Marvel Comics, you might think that would steer me away from Disney as my media stock pick.

But you’d be wrong because, in addition to the overwhelming evidence of a strikingly successful business model in media, Disney also has Disney World, the best family destination EVER devised.

So, unless GE finds something better than Sunday Night Football on its NBC affiliate, CBS develops more than just lame CSI franchise knockoffs, Viacom gets out of the Saturday-morning cartoon business, or News Corp. hires Rachel Maddow to moderate Fox and Friends, my money is on the Mouse.

Pass the remote.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he is long MSFT and (despite this column) TWX.

Endnotes:
  1. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  2. control 90% of what American’s read, watch, or listen to on a daily basis: http://www.ritholtz.com/blog/2012/07/media-consolidation-the-illusion-of-choice-2/#more-81574
  3. FrugalDad.com: http://frugaldad.com/
  4. CBS: http://studio-5.financialcontent.com/investplace/quote?Symbol=CBS
  5. TWX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWX
  6. VIAB: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIAB
  7. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE
  8. DIS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DIS
  9. NWSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=NWSA

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