The Number One Reason This Communications Company Will Score Big
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We all want a winner. On the field we want to be the ones at the end of the season holding up that shiny trophy. As individual investors we want more money in our pockets at the end of the year than we could have gotten by handing our accounts over to someone else or plowing them into an index fund.
Finding those winning investments is tricky. For a company to earn above average profits they’ve got to have something that their competitors cannot replicate. In the communications industry that competitive advantage is found in having control over your content. For Canadian communications and media giant Rogers (NYSE: RCI) their ability to continue to secure content is going to score a big boost their returns for years to come.
Control of content is one reason why Disney (NYSE: DIS) has been able to earn such fantastic profits over the years. Their control of content and ability to distribute it over multiple channels has served their investor well. They can conceive a character and create a platform upon which to make a movie, build a video game, manufacture a toy or create a theme park experience, with profits being created every step of the way.
Rogers is no Disney but their investment in content has added brands to their media empire that can’t be replicated or easily replaced. Just as Disney owned brand of sportscaster ESPN has generated winning profits for the company, Rogers has sought to invest even deeper into the sports niche. Not only do they own Canada’s major sports broadcasting network Sportnet, but they’re controlling an increasing amount of the content that’s broadcasted on the network.
Just recently they completed their joint acquisition of a 75% state in Maple Leaf Sports & Entertainment (MLSE) which owns four Toronto based sports teams: the NHL’s Maple Leafs and their AHL affiliate, the NBA’s Raptors, and a professional soccer team. Additionally, MLSE owns sporting venues like the Air Canada Centre where the Maple Leafs and Raptors play as well as several television channels which broadcast the games of the sport franchises. Combine this with their 100% ownership interest in the Toronto Blue Jays and the Rogers Center where they play and you can see the content moat they are dredging.
To further their reach they announced just days after closing their MLSE venture that they are buying Score Media’s TV network and related assets. Score delivers premium niche sports content to over 6.8 million homes across Canada. Simultaneously they’ll spin out thescore.com and the related digital assets while retaining a 10% equity stake in that business. Finally, they’ll be rebranding theScore TV network under their Sportsnet umbrella. In these two deals they added more content to be distributed across more channels which should eventually score them more profits.
Rogers continues to make a huge push into content and for good reason. Content is King. That’s one reason why we’ve seen other content distributors focus on becoming content owners. Comcast (NASDAQ: CMCSA) for instance has acquired a majority NBC Universal from GE (NYSE: GE) so that they own control over the content they are providing their subscribers. Like Comcast, Rogers is a large cable TV service provider and by owning the content they can both use it to retain their current customers as well as sell access to that content to their competition. While owning content was a nice profit center for industrial giant GE, owning simply doesn’t have the same advantage as it does for Comcast.
I think that Rogers continued push into content which will then flow through their distribution network will be a winning combination for shareholders. That’s one of the reasons I want to add shares to my virtual “No Drip, No Mess” Portfolio. However, with shares now north of $40 my October $30 puts are very likely to expire worthless, I’ll wait until after expiration and then consider my options. The company’s growth has slowed to a crawl but as they continue to add content that’s impossible to replicate and manage to win, they’ll score big with both fans and shareholders.
latimerburned owns shares of Rogers Communications (USA). The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend Rogers Communications (USA) and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.