Content is King...Even on Wall Street

By LEVI SHAPIRO

Traditional media companies had an amazing year on Wall Street. While the Dow Jones Index increased a respectable 6.7%, the US Broadcasting and Entertainment Index surged 40%. In fact, other than Sony (dragged down by its hardware business), 6 of the top 7 media conglomerates substantially outperformed the NASDAQ 500.  

Comcast absorbed NBC Universal, becoming the largest player in the sector with a market cap of $99.28 billion. Investors shrugged off pesky details at News Corp, such as bribery, phone-hacking and perjury, increasing the share price by 47%.  The biggest winner was Lionsgate Entertainment, which reaped the benefits of hugely successful franchises Hunger Games and Twilight. Viacom, on the other hand, desperately needs more hit shows. TV networks account for 90% of Viacom’s profits but ratings at Nickelodeon and MTV last year were down about 30%.

The worst performing media category was video games. Electronic Arts (-30%), Activision (-13%) and Zynga (-67%) saw their margins eaten by free to play (f2p) casual mobile games.

 

Even newspaper conglomerates outperformed the S&P 500, which rose by 13.7%. Six of the 8 major US publicly traded companies were up last year, four of those by more than 30%. These stocks have been pummeled over the last few years but investors liked the increase in profits (although revenue continues to fall dramatically), smart investments in digital start-ups and the widespread introduction of pay-walls. Lee (+69), McClatchy (36.8%), EW Scripps (35%) and Gannett (34.7%) were the biggest winners.

 

In a period of high unemployment and economic uncertainty, clearly Wall Street believes that “Content is King”