ValueVision posted a great quarter with sales growth that bested its two competitors QVC and HSN and posted its first EBITDA positive quarter in over two years. The shares round tripped, first spiking 7% but ending down 8% for the day, due, we believe, to some profit taking.
This presents a buying opportunity for the shares, which are worth over $7 by the end of 2011, according to our math. See our valuation here.
From the call, it became clear that Comcast should likely take hold of the network and build it into a competitor to the other two networks. Thus the future looks bright for the company.
Read More!
Friday, November 19, 2010
Wednesday, November 17, 2010
Hulu lowers price and offers referral service
Hulu has lowered its price to $7.99 and is offering a referral service to existing subscribers.
Thanks for being a subscriber to Hulu Plus during our preview. We've been hard at work refining our existing applications, expanding the device coverage, and extending our content lineup. We're excited to announce that today, Hulu Plus is officially launching out of preview to anyone in the U.S. for just $7.99/month.
Since we're now offering Hulu Plus at a lower price than during the preview, your subscription fee has been lowered to $7.99/month, and on your next billing cycle, we'll also automatically credit your account with $2 for each month you've been a subscriber. In addition, we're now offering a 1-week free trial for all new subscribers, so we'll be issuing you an additional $2 credit since the free trial wasn't in place during the preview.
We'd also like to offer you the chance to earn more free time on Hulu Plus by helping us spread the word about the service. For each friend who uses your referral to join Hulu Plus, we'll give you two additional weeks for free, up to 20 weeks total. Each of your referrals will also receive two weeks free on their first month's subscription. For more details on the program and to invite your friends, please visit http://www.hulu.com/profile/referrals.
Since the Hulu Plus preview began, we've added more TV shows and extended our device coverage. To see which shows are now available on Hulu Plus, please visit http://www.hulu.com/plus/content, and to see the most up-to-date list of supported TVs, Blu-ray players, set-top boxes, mobile phones, and tablets visit http://www.hulu.com/plus/devices.
Thanks for supporting us during the Hulu Plus preview. We look forward to continuing to work on your behalf in the months and years to come.
The Hulu Team
Read More!
Thanks for being a subscriber to Hulu Plus during our preview. We've been hard at work refining our existing applications, expanding the device coverage, and extending our content lineup. We're excited to announce that today, Hulu Plus is officially launching out of preview to anyone in the U.S. for just $7.99/month.
Since we're now offering Hulu Plus at a lower price than during the preview, your subscription fee has been lowered to $7.99/month, and on your next billing cycle, we'll also automatically credit your account with $2 for each month you've been a subscriber. In addition, we're now offering a 1-week free trial for all new subscribers, so we'll be issuing you an additional $2 credit since the free trial wasn't in place during the preview.
We'd also like to offer you the chance to earn more free time on Hulu Plus by helping us spread the word about the service. For each friend who uses your referral to join Hulu Plus, we'll give you two additional weeks for free, up to 20 weeks total. Each of your referrals will also receive two weeks free on their first month's subscription. For more details on the program and to invite your friends, please visit http://www.hulu.com/profile/referrals.
Since the Hulu Plus preview began, we've added more TV shows and extended our device coverage. To see which shows are now available on Hulu Plus, please visit http://www.hulu.com/plus/content, and to see the most up-to-date list of supported TVs, Blu-ray players, set-top boxes, mobile phones, and tablets visit http://www.hulu.com/plus/devices.
Thanks for supporting us during the Hulu Plus preview. We look forward to continuing to work on your behalf in the months and years to come.
The Hulu Team
Read More!
Monday, November 15, 2010
Microsoft sold 1M Kinect in 10 days
Microsoft states that it is on pace to sell 5 million by the end of the year. Kinect launched in the U.S. on November 4th and then followed by Europe on November 10th and will launch in Asia on November 18th and Japan on November 20th.
Read More!
Saturday, November 13, 2010
Meida execs with their head in the sand on cord-cutting
Media executives, with the exception of DirecTV, appear to deny the existence of the cord-cutting phenomena that is gripping the country and is likely to grow stronger over the next few years. DirecTV is addressing it head-on with their Cinema initiative, but others from both the content and distribution side, are flat out denying it, with NewsCorp's CEO stating that he "does not get this cord-cutting issue". My guidance to them is wake up. Cord-cutting is real. Remember the denials from the newspapers about the threat from the Internet?
Chase Carey - News Corporation - President and COO
No. In fact, I think we would be looking at subs going up, but I think an awful lot was read into that. I don't get this core cutting issue. I just don't see it. I mean, realistically, I think it is a second or third quarter in a mature market, probably a little tougher quarters and cable down a bit and satellite and telcos still up and I feel it is a fundamental service that for American households is a fundamental part of what they do with their time, and what they value in their life and I think it is a service without comparison, but, no, we would not be seeing that.
Philippe Dauman>: Viacom - President and Chief Executive Officer
As it relates to Netflix. Netflix itself has positioned itself not as being a substitute for television viewing, but as a complementary service, and that is the way it is being used. I think it's remarkable that in the teeth of a powerful recession that we went through, that continued viewership of subscription television has held up as well as it has. So I think there's been much ado about little, in terms of all the talk about cord-cutting. Television provides a great value with a lot of and certainly as it relates to our networks, we have actually seen the number of subscribers, on our fully distributed - or more fully distributed networks, increase from the data that we had through the second quarter. And that's because we continue to achieve incremental distribution
through services like the telcos, which provide a broader array of channels than some of the distributors in the various markets. So we don't see cord-cutting as affecting our business. The economy obviously holds down growth in distribution. As the economy recovers, we expect to see the number of television subscribers in the U.S. grow at a better clip than it has over the last year and a half or so.
Robert A. Iger, Disney - President and Chief Executive Officer
On the multichannel front, we've had conversations with a few multichannel providers very recently. And we know that there are concerns about cord cutting and the impact of all this digital distribution on their business. And the sense that we get is that the trends that they've seen very recently, which is a slight decrease in subscribers, is due mostly to the economy and the fact they went into the marketplace a year ago with some pretty low priced offers to mostly address the economy. And as those have expired, some of those consumers or subscribers have fallen by the wayside. The sense that we get is that no one has any evidence, at least currently, of cord cutting, but I still think that it's in the best interest of this company to see to it that the multichannel business remain robust, continues to flourish because obviously it creates so much value for us. So we're looking at basically the multichannel business in a bullish way, but we feel that we have to very carefully balance that business with our interests as a company to grow revenue on new platforms. And creating new product like the one I described for ESPN and authenticated ESPN and these other services, like Buzzer Beater and Red Zone, is one way to help the multichannel providers do that. So we're going to continue to look for opportunities on new devices because we think it improves monetization. But we're also going to look for opportunities to strengthen our relationship with the multichannel providers and create product that is beneficial to us, to them, and to their consumers.
John K. Martin, Time Warner, Executive Vice President and Chief Financial Officer
I also want to stress that we haven't really seen any evidence of cord cutting relating to over the top competitors. On the cord cutting, we're not seeing it - we doubt that we're going to see it, although we'll all watch for it.
Tom Cullen - DISH Network Corporation - EVP
And some cord cutting is inevitable, but if you read many of the reports, you would view these as binary. That is the assumption is if I consume some content over-the-top, I've therefore cut the cord. We don't really see it that way. We see it as multiple forms of delivery co-existing in the household for the most part, and that's why we are pursuing things like a greater focus on connectivity of our boxes with ethernet, where we're delivering more movie services, why we're doing things with Google TV and so forth. So nobody can predict the future perfectly, but we see it as -- not as binary as most people are projecting it to be.
Mike White - DIRECTV - President, CEO
How does that leads into the DIRECTV Cinema relaunch thought? Do you feel like you're getting a lot mine share on that as an alternative to Netflix over time?
I think we plan to, but in fairness, our DIRECTV -- even though our pay-per-view movies are up over 30% in the quarter, you'd think we already relaunched DIRECTV Cinema. Actually, the relaunch really happens in December. And so I would expect that you will begin to see the impact of that more likely in the first quarter of next year when we really ramp-up our advertising. We just put out some new ads that you may have seen that are specific on the whole movie thing, but they are like a week out as we finished up the NFL SUNDAY TICKET stuff in the quarter. So, I am very bullish about what we will be able to do with the consumer, and I certainly believe -- look, we recognize in our space we have to look very broadly at competitors, and we have a lot of respect for what Netflix has done. But we don't -- we intend to compete and compete aggressively in that space. And I think you will see a lot of that as we roll of our new DIRECTV Cinema service in December of this year. I think that will give you a bit of the taste of where we are going, and I think the bigger metric to keep in mind is, as I said, our VOD per subscriber is less than half of what cable guys are today, much less were Netflix is. So, we think it is a big revenue growth opportunity for our
Company.
Landel Hobbs - Time Warner Cable Inc. - COO
By and large, similar to what we saw on the connect side, these subs were in our two lowest value segments. On the other hand, we've been performing well in high-end, high ARPU segments. By the way, we haven't been able to identify any increase in video cord cutting related to over-the-top video. A couple of examples -- first, as Rob mentioned, our video losses in the quarter were driven by single play video customers and second, our video high speed data Double Plays actually increased in the quarter. That's the opposite of what we'd expect to see if there were meaningful cord cutting. And another example, we looked at college towns like Austin, Texas and Columbus, Ohio in our footprint to examine the thesis that video cord cutting might have contributed to weaker connect volume this quarter. Turns out, the college enrollment flat this year compared to last and our video connect volumes were also flat. So, we'll continue to monitor cord cutting, but haven't found evidence where you might expect to see it.
Neil Smit - Comcast Corporation - President, Cable
John Hodulik - UBS - Analyst
Thanks, guys. Good morning. The Video losses were a little higher than we expected. Can you comment on what do you think is driving that? Is that -- now you said some hangover from the digital transition but is there evidence in the numbers that you are seeing more cord-cutting from over the top or even competition from AT&T and Verizon?
Hi, John. It's Neil. I think there were a few factors and let me break them down. The first was the economic situation that Mike referred to, we are seeing fewer occupied housing units and the unemployment is still a factor. I think the second is the digital transition and the promotional roll off. 42% of the customers we lost were basic customers. The digital transition appears to be mostly behind us. I think the third reason is the rate increases we took so this year we took rate increases over the last six months so Q2 and Q3 in about 75% of our footprint versus about 3% last year. From an over-the-top impact, we have -- all our exit surveys have seen almost no impact. We have seen customers who are disconnecting and not going to a competitor. That small number of customers appear to be going over-the-air much more than any over-the-top impact. The competitive situation really hasn't changed much. We have seen year-over-year a buildout of the RBOCs, so AT&T about 2.2 million home buildout. We haven't seen a significant increase of that competitive factor.
Vijay Jayant - Citadel Securities - Analyst
I really have sort of an observation and want to get your reaction to it is there has been a lot of talk about over-the-top impact to multichannel video, but if you sort of look at the pricing that most operators have for the faster speed tiers of broadband, if there is over-the-top cord-cutting, aren't cable operators actually on the margin a little better or even neutral given the margin of the two businesses? Thanks.
I think you are right in terms of the potential opportunity. If over-the-top and there -- comes into being and there is more consumption of online video, we feel very good about our capacity. That is one of the reasons we have invested so heavily in DOCSIS 3. We feel that that big pipe into the house is important and we will continue to invest in speed increases like that, like DOCSIS 3. We think it's an important component and the consumers continue to consume more bandwidth.
Read More!
Chase Carey - News Corporation - President and COO
No. In fact, I think we would be looking at subs going up, but I think an awful lot was read into that. I don't get this core cutting issue. I just don't see it. I mean, realistically, I think it is a second or third quarter in a mature market, probably a little tougher quarters and cable down a bit and satellite and telcos still up and I feel it is a fundamental service that for American households is a fundamental part of what they do with their time, and what they value in their life and I think it is a service without comparison, but, no, we would not be seeing that.
Philippe Dauman>: Viacom - President and Chief Executive Officer
As it relates to Netflix. Netflix itself has positioned itself not as being a substitute for television viewing, but as a complementary service, and that is the way it is being used. I think it's remarkable that in the teeth of a powerful recession that we went through, that continued viewership of subscription television has held up as well as it has. So I think there's been much ado about little, in terms of all the talk about cord-cutting. Television provides a great value with a lot of and certainly as it relates to our networks, we have actually seen the number of subscribers, on our fully distributed - or more fully distributed networks, increase from the data that we had through the second quarter. And that's because we continue to achieve incremental distribution
through services like the telcos, which provide a broader array of channels than some of the distributors in the various markets. So we don't see cord-cutting as affecting our business. The economy obviously holds down growth in distribution. As the economy recovers, we expect to see the number of television subscribers in the U.S. grow at a better clip than it has over the last year and a half or so.
Robert A. Iger, Disney - President and Chief Executive Officer
On the multichannel front, we've had conversations with a few multichannel providers very recently. And we know that there are concerns about cord cutting and the impact of all this digital distribution on their business. And the sense that we get is that the trends that they've seen very recently, which is a slight decrease in subscribers, is due mostly to the economy and the fact they went into the marketplace a year ago with some pretty low priced offers to mostly address the economy. And as those have expired, some of those consumers or subscribers have fallen by the wayside. The sense that we get is that no one has any evidence, at least currently, of cord cutting, but I still think that it's in the best interest of this company to see to it that the multichannel business remain robust, continues to flourish because obviously it creates so much value for us. So we're looking at basically the multichannel business in a bullish way, but we feel that we have to very carefully balance that business with our interests as a company to grow revenue on new platforms. And creating new product like the one I described for ESPN and authenticated ESPN and these other services, like Buzzer Beater and Red Zone, is one way to help the multichannel providers do that. So we're going to continue to look for opportunities on new devices because we think it improves monetization. But we're also going to look for opportunities to strengthen our relationship with the multichannel providers and create product that is beneficial to us, to them, and to their consumers.
John K. Martin, Time Warner, Executive Vice President and Chief Financial Officer
I also want to stress that we haven't really seen any evidence of cord cutting relating to over the top competitors. On the cord cutting, we're not seeing it - we doubt that we're going to see it, although we'll all watch for it.
Tom Cullen - DISH Network Corporation - EVP
And some cord cutting is inevitable, but if you read many of the reports, you would view these as binary. That is the assumption is if I consume some content over-the-top, I've therefore cut the cord. We don't really see it that way. We see it as multiple forms of delivery co-existing in the household for the most part, and that's why we are pursuing things like a greater focus on connectivity of our boxes with ethernet, where we're delivering more movie services, why we're doing things with Google TV and so forth. So nobody can predict the future perfectly, but we see it as -- not as binary as most people are projecting it to be.
Mike White - DIRECTV - President, CEO
How does that leads into the DIRECTV Cinema relaunch thought? Do you feel like you're getting a lot mine share on that as an alternative to Netflix over time?
I think we plan to, but in fairness, our DIRECTV -- even though our pay-per-view movies are up over 30% in the quarter, you'd think we already relaunched DIRECTV Cinema. Actually, the relaunch really happens in December. And so I would expect that you will begin to see the impact of that more likely in the first quarter of next year when we really ramp-up our advertising. We just put out some new ads that you may have seen that are specific on the whole movie thing, but they are like a week out as we finished up the NFL SUNDAY TICKET stuff in the quarter. So, I am very bullish about what we will be able to do with the consumer, and I certainly believe -- look, we recognize in our space we have to look very broadly at competitors, and we have a lot of respect for what Netflix has done. But we don't -- we intend to compete and compete aggressively in that space. And I think you will see a lot of that as we roll of our new DIRECTV Cinema service in December of this year. I think that will give you a bit of the taste of where we are going, and I think the bigger metric to keep in mind is, as I said, our VOD per subscriber is less than half of what cable guys are today, much less were Netflix is. So, we think it is a big revenue growth opportunity for our
Company.
Landel Hobbs - Time Warner Cable Inc. - COO
By and large, similar to what we saw on the connect side, these subs were in our two lowest value segments. On the other hand, we've been performing well in high-end, high ARPU segments. By the way, we haven't been able to identify any increase in video cord cutting related to over-the-top video. A couple of examples -- first, as Rob mentioned, our video losses in the quarter were driven by single play video customers and second, our video high speed data Double Plays actually increased in the quarter. That's the opposite of what we'd expect to see if there were meaningful cord cutting. And another example, we looked at college towns like Austin, Texas and Columbus, Ohio in our footprint to examine the thesis that video cord cutting might have contributed to weaker connect volume this quarter. Turns out, the college enrollment flat this year compared to last and our video connect volumes were also flat. So, we'll continue to monitor cord cutting, but haven't found evidence where you might expect to see it.
Neil Smit - Comcast Corporation - President, Cable
John Hodulik - UBS - Analyst
Thanks, guys. Good morning. The Video losses were a little higher than we expected. Can you comment on what do you think is driving that? Is that -- now you said some hangover from the digital transition but is there evidence in the numbers that you are seeing more cord-cutting from over the top or even competition from AT&T and Verizon?
Hi, John. It's Neil. I think there were a few factors and let me break them down. The first was the economic situation that Mike referred to, we are seeing fewer occupied housing units and the unemployment is still a factor. I think the second is the digital transition and the promotional roll off. 42% of the customers we lost were basic customers. The digital transition appears to be mostly behind us. I think the third reason is the rate increases we took so this year we took rate increases over the last six months so Q2 and Q3 in about 75% of our footprint versus about 3% last year. From an over-the-top impact, we have -- all our exit surveys have seen almost no impact. We have seen customers who are disconnecting and not going to a competitor. That small number of customers appear to be going over-the-air much more than any over-the-top impact. The competitive situation really hasn't changed much. We have seen year-over-year a buildout of the RBOCs, so AT&T about 2.2 million home buildout. We haven't seen a significant increase of that competitive factor.
Vijay Jayant - Citadel Securities - Analyst
I really have sort of an observation and want to get your reaction to it is there has been a lot of talk about over-the-top impact to multichannel video, but if you sort of look at the pricing that most operators have for the faster speed tiers of broadband, if there is over-the-top cord-cutting, aren't cable operators actually on the margin a little better or even neutral given the margin of the two businesses? Thanks.
I think you are right in terms of the potential opportunity. If over-the-top and there -- comes into being and there is more consumption of online video, we feel very good about our capacity. That is one of the reasons we have invested so heavily in DOCSIS 3. We feel that that big pipe into the house is important and we will continue to invest in speed increases like that, like DOCSIS 3. We think it's an important component and the consumers continue to consume more bandwidth.
Read More!
NewsCorp has already denied interest in Yahoo!
With the recent talk about NewsCorp's interest in buying Yahoo!, we thought to go back the the company's recent public comments on this. During the 3Q10 conference call, responding to that very question from Credit Suisse analyst Spencer Wang, CEO Chase Carey essentially denied interest in pursuing Yahoo!. In addition, NewsCorp has failed at managing MySpace so what makes them think they can do a better job with a larger Internet asset. Doesn't make sense to us.
NewsCorp's response on 3Q10 call about acquiring Yahoo!
Chase Carey - News Corporation - President and COO
I think some things like Yahoo! or the press need to have things to write about. But, I think it's we don't need -- we are in now, certainly do not need to make any acquisitions. I think we've a great portfolio of businesses that we can grow aggressively that have a good diversification amongst them. I think what we want to be is make sure we're smart about things, and look at things that are out there and if there's something there, then we should consider it, but we're going to do so in a very disciplined way. I mean, we say -- looked it up, cable channel, we looked at Travel Channel a year ago. We kicked the tires something overseas recently, and, ultimately, they were -- people were looking for values that didn't make sense to us, and I think our general preference is to build businesses, not buy businesses.
It's the way we built the great businesses in News Corporation. It's what we -- where our focus will continue to remain, but if we see something that we think we could acquire it at a very attractive price that fits, I think we'd want to take a look at it. But, we're going to do so in a very disciplined way. We're certainly not out shopping for anything, and, again, I think our priority and focus and our preference is to build businesses. I think we've real opportunities to do that.
Read More!
NewsCorp's response on 3Q10 call about acquiring Yahoo!
Chase Carey - News Corporation - President and COO
I think some things like Yahoo! or the press need to have things to write about. But, I think it's we don't need -- we are in now, certainly do not need to make any acquisitions. I think we've a great portfolio of businesses that we can grow aggressively that have a good diversification amongst them. I think what we want to be is make sure we're smart about things, and look at things that are out there and if there's something there, then we should consider it, but we're going to do so in a very disciplined way. I mean, we say -- looked it up, cable channel, we looked at Travel Channel a year ago. We kicked the tires something overseas recently, and, ultimately, they were -- people were looking for values that didn't make sense to us, and I think our general preference is to build businesses, not buy businesses.
It's the way we built the great businesses in News Corporation. It's what we -- where our focus will continue to remain, but if we see something that we think we could acquire it at a very attractive price that fits, I think we'd want to take a look at it. But, we're going to do so in a very disciplined way. We're certainly not out shopping for anything, and, again, I think our priority and focus and our preference is to build businesses. I think we've real opportunities to do that.
Read More!
Friday, November 12, 2010
More value for ValueVision in the hands of ComCast
ValueVision shares are likely to benefit from an improvement in both sales and EBITDA, with Adj. EBITDA likely turning positive, when they report 3Q10 results next week, November 18th. Plus Comcast, after the NBC deal is consummated, is likely to take hold of ValueVision and grow it into a very competitive television shopping network.
The distant no. 3 home shopping television network once saw its shares trade as high as $57 back in the hey days of the late 1990s but as low as 20 cents during the recent financial crisis. See a previous write-up on ValueVision here.
However, the company appears to be on track for a solid rebound. So far this year, they have hired a new CFO, a VP of Merchandising, a VP of Merchandising Analysts (whatever that is), a VP of Quality Assurance, and a new President overseeing Merchandising, Planning, Programming, Broadcast Operations, and On-Air Talent. All of these appointees have decades of experiencing in retailing and media and provides a deep bench from which the company can continue to pursue its turnaround strategy.
Several insiders have actually bought shares, which to us, is a good sign.
We are estimating that the company can grow sales 6.2% y/y to $127 million in 3Q10 and likely see an Adj. EBITDA swing of approximately $7 million y/y to $1.3 million for a 1% margin. <
ValueVision's two competitors grew their domestic sales an average of 6.2% in 3Q and we are assuming that ValueVision can match that growth rate. In 2Q10, ValueVision bested its competition by 2.6%, thus, our estimate could likely prove conservative.
Layer on top of that a potential acquisition. One of the two competitors have expressed interest in ValueVision in the past.
But notably, and one of the best reasons to own the stock, is the potential for what ValueVision can become in the hands of Comcast. The cable company is set to get NBC's stake in ValueVision when the merger is completed. It is likely to then take hold of the network, invest in it, and grow it competitively. Watch for that catalyst.
Only one firm, Dougherty, has a rating on the shares, at Buy with a $5 price target, suggesting a 60% upside is achievable. Our back of the envelope valuations show that the shares can jump to over $7 by year-end 2011, using modest assumptions for revenue growth through 2012 and a 5% Adj. EBITDA margin, which is half the margins of competitor HSN. A 7x multiple we think is reasonable for this business and compares to its competitors. At a 7.5% Adj. EBITDA margin, which is certainly doable, the shares are worth north of $10.
Read More!
The distant no. 3 home shopping television network once saw its shares trade as high as $57 back in the hey days of the late 1990s but as low as 20 cents during the recent financial crisis. See a previous write-up on ValueVision here.
However, the company appears to be on track for a solid rebound. So far this year, they have hired a new CFO, a VP of Merchandising, a VP of Merchandising Analysts (whatever that is), a VP of Quality Assurance, and a new President overseeing Merchandising, Planning, Programming, Broadcast Operations, and On-Air Talent. All of these appointees have decades of experiencing in retailing and media and provides a deep bench from which the company can continue to pursue its turnaround strategy.
Several insiders have actually bought shares, which to us, is a good sign.
We are estimating that the company can grow sales 6.2% y/y to $127 million in 3Q10 and likely see an Adj. EBITDA swing of approximately $7 million y/y to $1.3 million for a 1% margin. <
ValueVision's two competitors grew their domestic sales an average of 6.2% in 3Q and we are assuming that ValueVision can match that growth rate. In 2Q10, ValueVision bested its competition by 2.6%, thus, our estimate could likely prove conservative.
Layer on top of that a potential acquisition. One of the two competitors have expressed interest in ValueVision in the past.
But notably, and one of the best reasons to own the stock, is the potential for what ValueVision can become in the hands of Comcast. The cable company is set to get NBC's stake in ValueVision when the merger is completed. It is likely to then take hold of the network, invest in it, and grow it competitively. Watch for that catalyst.
Only one firm, Dougherty, has a rating on the shares, at Buy with a $5 price target, suggesting a 60% upside is achievable. Our back of the envelope valuations show that the shares can jump to over $7 by year-end 2011, using modest assumptions for revenue growth through 2012 and a 5% Adj. EBITDA margin, which is half the margins of competitor HSN. A 7x multiple we think is reasonable for this business and compares to its competitors. At a 7.5% Adj. EBITDA margin, which is certainly doable, the shares are worth north of $10.
Read More!
Google should look to buy MySpace
This make sense to us. NewsCorp is having a difficult time driving this business back to growth and profitability. This is likely because traditional media companies do not have the necessary vision to manage and grow prominent Internet assets. Time Warner gave up on AOL and Newscorp should do the same with MySpace.
However, MySpace is not, we believe, in the best fundamental position to be spun off into a separate company like AOL. Thus, a sale should be the best option.
Enter Google. Recent press reports states that Google is looking to do an acquisition along the size of YouTube and DoubleClick. We think MySpace will make a perfect addition to the Google architecture, and in particular, YouTube. There is a tremendous amount of synergies with YouTube that would allow both sites to grow. And with rumors that Google is prepping a FaceBook competitor, Google can layer on MySpace to that FaceBook competing business, add robust security settings, and the result should be a feasible competitor to FaceBook.
Google can then add a link to MySpace on the white homepage to rebuild awareness and drive traffic to the site. This would probably allow the search business on MySpace to grow exponentially.
Just our two cents.
Here are recent comments from NewsCorp about MySpace:
"This increased loss primarily reflects $70 million in lower search and advertising revenues at MySpace versus a year ago."
"On the other hand, results in MySpace have been below plan"
"The final business I want to touch on is MySpace. We've been clear that MySpace is a problem. We recognize that we had to redefine and largely rebuild this business. We believe the foundation was there to warrant this effort and it has been our focus this year. We've made adjustments in the cost structure and most recently by consolidating ad sales and, most importantly, in the last few weeks we have relaunched MySpace with a focus on social entertainment. We feel really good about this relaunch product and it has been generally well received by the opinion makers in the business but we recognize the critical issue is building interest with consumers. We also recognize the challenges we face in doing so. The current losses are not acceptable or sustainable. Our current management did not create these losses, but they know we have to address them. I give them great credit for pouring their hearts and sweat into creating a great new MySpace experience that has the potential to be an exciting business for us. We equally know we need to make real headway in the coming quarters to get this business to a sustainable level."
"Michael Nathanson - Sanford C. Bernstein & Company - Analyst
Thanks, I have one for Chase on MySpace. You mentioned the relaunch. I wondered how much time needs to pass before you judge whether or not it's successful and how you judge whether or not it's successful? What are you looking for and, if it doesn't work, what happens next? That's what I am looking at."
"Chase Carey - News Corporation - President and COO
I'm not going to put a specific safety or fluid businesses, but I think this is something we looked to judge in quarters, not in years. And, I think our goal is to get to a place, essentially, probably, that is got a revenue top line that is going in the right direction and a clear path to profitability. I think those are the goals we set for that business, and I think the product we launch we feel really good about. We recognize we have to build an audience. We've got an audience. We still have great reach to give us the foundation to bring an audience to that product but our traffic numbers are still not going in the right direction and we have to stabilize that and have a predictable path forward and make sure we've the right cost structure and again a clear path to be a profitable business."
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However, MySpace is not, we believe, in the best fundamental position to be spun off into a separate company like AOL. Thus, a sale should be the best option.
Enter Google. Recent press reports states that Google is looking to do an acquisition along the size of YouTube and DoubleClick. We think MySpace will make a perfect addition to the Google architecture, and in particular, YouTube. There is a tremendous amount of synergies with YouTube that would allow both sites to grow. And with rumors that Google is prepping a FaceBook competitor, Google can layer on MySpace to that FaceBook competing business, add robust security settings, and the result should be a feasible competitor to FaceBook.
Google can then add a link to MySpace on the white homepage to rebuild awareness and drive traffic to the site. This would probably allow the search business on MySpace to grow exponentially.
Just our two cents.
Here are recent comments from NewsCorp about MySpace:
"This increased loss primarily reflects $70 million in lower search and advertising revenues at MySpace versus a year ago."
"On the other hand, results in MySpace have been below plan"
"The final business I want to touch on is MySpace. We've been clear that MySpace is a problem. We recognize that we had to redefine and largely rebuild this business. We believe the foundation was there to warrant this effort and it has been our focus this year. We've made adjustments in the cost structure and most recently by consolidating ad sales and, most importantly, in the last few weeks we have relaunched MySpace with a focus on social entertainment. We feel really good about this relaunch product and it has been generally well received by the opinion makers in the business but we recognize the critical issue is building interest with consumers. We also recognize the challenges we face in doing so. The current losses are not acceptable or sustainable. Our current management did not create these losses, but they know we have to address them. I give them great credit for pouring their hearts and sweat into creating a great new MySpace experience that has the potential to be an exciting business for us. We equally know we need to make real headway in the coming quarters to get this business to a sustainable level."
"Michael Nathanson - Sanford C. Bernstein & Company - Analyst
Thanks, I have one for Chase on MySpace. You mentioned the relaunch. I wondered how much time needs to pass before you judge whether or not it's successful and how you judge whether or not it's successful? What are you looking for and, if it doesn't work, what happens next? That's what I am looking at."
"Chase Carey - News Corporation - President and COO
I'm not going to put a specific safety or fluid businesses, but I think this is something we looked to judge in quarters, not in years. And, I think our goal is to get to a place, essentially, probably, that is got a revenue top line that is going in the right direction and a clear path to profitability. I think those are the goals we set for that business, and I think the product we launch we feel really good about. We recognize we have to build an audience. We've got an audience. We still have great reach to give us the foundation to bring an audience to that product but our traffic numbers are still not going in the right direction and we have to stabilize that and have a predictable path forward and make sure we've the right cost structure and again a clear path to be a profitable business."
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