(sponsored by the AMM Music Group)
Most stock tipsheets, newspapers and magazines currently celebrate media stocks without discriminating at all between the many different kinds of companies in this field and the specific income models and chances of these companies according to their role in content and media. Each of the basic content companies usually has its own creative people, some of which I have tried to list in the respective fields.
In some content and media fields there are more or less steps and rights involved in the basic usable content and therefore there can be just a few contributing content owners in some cases. Some forms of consumable content - e.g. films and computer games - are mutli-level content product with several basic valuable and protected content products integrated into a new compound product with its own copyright and income potential.
To get a realistic picture of the value of media stocks, have a close look at what role in the overall value and money flow a company has. Usually, final retail and broadcast is in problematic situation today, while real content ownership is the most profitable position in the long term. Since the development and marketing of valuable content is expensive and risky, this side is more interetsting in the long run, but you should look for companies that own a lot of different products and which develop quite a lot of high quality original content with unique selling points (e.g. computer games, music, films that are very different then the mass of pre-existing products in their field). Be extremely carefull of broadcasters or web-portals that do compete just on price and do not have their own branding. Some of them might be high-flying stocks now because they might have a lot of visitors right now - but their future could be very much endangered when the consumers in Europe and Asia get used to the internet and start to get really choosy regarding the sites they visit. Advertising driven companies are also strongly endangered by potential downturns in customer profits and the potentially resulting reductions in ad budgets. The ideal media company is a content owner which does not rely on advertising for its income at all and which has strong name recognition for its products or their makers.
1) Companies: Music publishers, literary agents, book
publishers, press agencies, photographic agencies, artist managers
(and sometimes art galleries), sports event organizers
2) Creatives: music composers, literary authors and screen
writers, jorunalists and researchers, painters, photographers,
athletes
1) Companies: record labels ( and sometimes independend music
producers), basic print media (newspapers and magazines), film
production companies (studios)
2) Creatives: performing musicians (artists), music producers, sound
engineers, editors (book and magazine), film producers
Music distributors, film distributors, games distributors, radio programme syndicators etc.
These companies sell or rent - and sometimes manufacture and sell under a temporary license products based on the content or carrying the content (CDs, Videos) to retailers.
A specific form are rights dealers for movies, which can buy film resale rights for a certain time and rent the use of films to TV-broadcasters.
This field includes most media as well as most traditional retailers, websites and video-rental stores. They serve the content to the public as final steps in the sales chain.
TV and radio as well as their new and sometimes slightly improved interactive counterparts on the web are actually just final resellers for movies, music and text content.
Some of them branch out into content production themselves - TV-companies developing their own shows or series or mini-movies or co-producing (and sometimes co-owning) theatrical movies. Some of these also add additional value (for the consumer) to a content product, for example with commentary or by helping consumers to find new and (for the consumer) valuable content matching his/her taste.
The chances for this last step in the value chain are not very good in the long term unless such a company develops their own branding, since the internet makes it easier and cheaper for competitors in this field to compete globally.
In this sense the internet is helpfull for primary content producers. Since the growth of product by new musicians and authors is now limited (the prices to produce a basic consumable product like a music recording fell sharply in the 90s and has now reached its bottom) while the cost and therefore competition of media through the internet is just beginning to fall very fast, the retailers and final mass media will be in a very weak position within a few years. This trend might be accellerating with broadband internet connetcions to the consumer enabling high-quality video transfers via the net and video-on-demand (pay-per-view) delivieries.
The point of view taken here by me is not undisputed - some consultancy companies like Price, Waterhouse officially claim that content is or will become weaker in comparison to access giving media. This might be because most of their client base in this field are media companies in the sense of final retail (broadcasters and websites). If they really believed in this, they would not even think of selling their business advice online, since such advice is actually editorial content - but try to become resellers of information at the final step. Several other large consultant groups have different opinions.
If you need proof that in the long term content will dominate, study the history of some websites that tried to sell compilation-CDs or downloads and have either gone bancrupt or are already in serious problems. All of them were trying to make money without paying a lot for content by using the abundant flow of cheap, but non-established music-content to keep their costs low. The results are predictably disastrous, since part of the value of content is the fame (in conventional point of view: "brand recognition") of the artist or song and this is built with a lot of money (by record companies) and over some time - if the quality of the product is good enough at all. See A comparison of terms and economic models of music and other fields of business for further explanations and comparisons regarding branding with entertainment and "normal" products.
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Author: Alex Merck
Last Updated: 23.February 2000