Fall TV: Who Benefits?

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The new fall TV season is starting and it seems to matter less every year to the companies’ share prices. The big winner in the early reviews so far is “Nashville” on ABC, a drama of two country music divas forced to tour together as teeth-gnashing rivalry ensues. Another winner looks to be “The Mindy Project’” on FOX written by and starring Mindy Kaling, formerly the shallow and manipulative Kelli Kapoor character of "The Office". In this one, Kaling oversees a humorous yearlong makeover of her life.

Why don’t the shows move the needle anymore? In 1992 Bruce Springsteen wrote a song “57 Channels (and Nothin’ On)”.  Well, just multiply that by ten. Shows from all different channels premiere throughout the year so the big media noise the networks used to enjoy in September has been considerably muted.

Now there are only four of what used to be called the Major Networks: ABC, CBS, NBC, and FOX. Their respective owners are: Walt Disney Co. (NYSE: DIS), CBS Corporation (NYSE: CBS), NBC is jointly owned by Comcast as the majority owner and General Electric, and News Corp (NASDAQ: NWS).

Do New Shows Matter?

Is a good fall slate of shows enough of a catalyst to buy in? You may see a lot of headlines about the new shows but all these companies have so many moving parts that one or even two big blockbuster shows would see little effect, if any, on the share price and not until much later in the season.

For example, News Corp, which owns Fox media, is a diversified media company and operates in four main segments: Cable Network Programming, Filmed Entertainment, Television, and Publishing. You are probably very aware of one of their properties, The Wall Street Journal.

Their big television hits in the last year were Glee, NFL on Fox, American Idol, and the long running The Simpsons. But television isn’t quite where it’s at anymore as Founder, Chairman, and CEO Rupert Murdoch wrote in the 2012 Annual Report, “Digital is a big part of this future. A perfect example is the $300 million in revenue we reported this year from two on-demand deals with Netflix and Amazon.com for our television and films. These deals are important because they allow us to generate significant revenue streams without cannibalizing on existing businesses.”  

The big news about News Corp is that they will split by next June into two publicly traded companies; Global Media and Entertainment and the other will be Global Publishing. The shares in both will be further separated into Class A Common and Class B Voting shares.

Since the hacking scandal broke last year the stock has been gradually moving up to a 52 week high of $24.80 on September 14 from its low of $14.72.  The scandal has been media fodder with its firings, corporate shuffling, newspaper closings, and even a pie-throwing incident in which Murdoch’s wife slugged the pie thrower. News Corp’s P/E is now 52.34 with a .70% yield, not exactly as affordable as it used to be.

CBS Corporation is a more reasonable value with a  P/E of 16.56 and a yield of 1.30%. CBS operates in five segments: Cable Networks, Entertainment, Publishing, Local Broadcasting, and Publishing. CBS is the runt of the big networks with a market cap of 23.76 billion compared to Disney’s 93.57 billion, News Corp’s  58.24 billion, and Comcast Corporation at 93.81 billion. Despite that it has the lowest P/E of all of them and has stealthily moved up 51.94% in a year.

CBS, however, may be the most dependent on network and broadcast revenues. When CBS reported Q2 earnings on August 2 they reported a 12% rise in EPS to $0.65 a share but the top line of revenues was down 3%. Like News Corp it is dependent on content deals like those it made in 2011. Without those new streaming deals this year revenues were down. Digital is really where they need to expand.

The company like most of the entertainment companies runs with a lot of debt, a 67.22 total debt/equity and there have been no insider purchases in the last six months.

Disney operates not just Media Networks, which includes ABC, ESPN, Disney channels, Radio Disney and Soap Net, but also the Parks and Resorts which includes the Disneyworld and Disneyland parks and the cruise lines but also runs the Studio Entertainment division, and finally Consumer Products which are all the Disney toys and licensed and branded products. Whew! I have written before of Disney in regard to its cruise lines as well as the overall stock. It is again close to its 52 week high of $52.75 and has really been a monster performer this year, sort of like Shrek. It is up over 61.41% over a year and is just dollars away from its price target of $54.08.

Disney‘s ESPN has been one of its best performing segments and with football season underway both News Corp and Disney should see some solid advertising revenue.  Disney’s share price is always moving on the strength of the consumer and its willingness to spend at the movies, the theme parks, and the cruises. Consumer confidence is crucial to the theme parks and resorts division.

Comcast is still mainly a cable company and I won’t compare it here as it competes more directly with Verizon, Dish Network, and other cable companies.

You could invest with any of these based on your particular criteria but News Corp has a much higher P/E than the others and there is lingering headline risk on the hacking scandal although it seems to be winding down. CBS has been a stealth play over the last year but it has had that big move and without any new deals on the horizon it could just tread water. Disney really is a name I believe you can bank on right now with its P/E barely higher than CBS.

Just realize that the fall shows are only minimal catalysts to these stocks. Selling content for digital streaming is where the action is now. I would love to hear what shows you think will be blockbusters.

 

 


leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend 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.

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