Archive for the ‘Finance’ Category
September 4, 2008
A cut of 0.25% to the official cash rate and suddenly a mind-shift occurs, sending investor sentiment into positive territory for the first time in many months. This week the index hit 669.42 - up almost 10% in just four weeks - and carried for the most part by strong rallies around digital stocks like realestate.com.au (up 40%) and Seek (up 14%).
Perhaps the latter stock is being bouyed by expectations of higher unemployment figures!
Other strong performers included PMP (up 29%) and Austereo (AEO) up 24%.
While there were very few negative growth figures (with the exception of Village down alomst 10%), most of the high cap stocks were less than impressive, particularly newspaper publishers such as WAN and Fairfax, with both stocks bogged down by aneamic growth rates of 1.7% and 0.73% respectively.
Only in the coming weeks can we be sure that August was the month in which the market bottomed out.
August 22, 2008
A Red Letter Day. This week the VM Index showed a positive gain - the first time since May 08 - rising to 617.7 after hitting a bottom of 610.80 at the end of July. Despite the glimmer of hope, any portfolio following the index’s weightings would still be almost 40% below water seven months on. Resource stocks these ain’t.
Strong gains by the likes of PMP (+23%), TEN (+9.33%), Austereo (AEO) (+8.5%) and realestate.com.au (REA) (+8.8%), demonstrated that the short burst of optimisim wasn’t confined to one particular media type or category.
Stocks which experienced a less than glowing endorsement included Village Roadshow (VRL) -8.7%, WAN (-4.6%) and Fairfax (FXJ) -0.4%.
August 10, 2008
Time Warner refuses to scotch rumours of an AOL sell-off, despite the worst than expected performance of the group’s online division. State-side, the AOL division is missing all financial targets, thanks in part to a strategy which sounded good at the time - dump subscription fees for advertising dollars. Perfectly reasonable in a bullish ad market!
Yet, despite the turbulence, AOL has invested millions in its Advertising.com ad network, aong with swallowing the Euro-centric social site, Bebo. Interestingly, AOL has re-launched its Australian presence, with an obvious interest in propelling Bebo to a critical mass locally.
The question for AOL, and its relatively late run in the Australian market is, can its social network, with an audience profile skewed towards a sub-16 age group, generate the necessary attention to garner advertising support, or is this simply a spoiling exercise to disrupt MySpace’s local efforts?
To be brutaly frank, all social networks are playing the spoiling game. None are generating sales-based returns for advertisers here in Australia, yet they still attract display ad dollars which would probably be better spent elsewhere online, hence their ability to disrupt or impede revenues of the more ‘traditional’ online media plays.
In the meantime, the combination of Bebo, MySpace and Facebook battle it out for two very different audiences - those aged below 18 years (Bebo, MySpace) and those above (Facebook). Yet, all have one thing in common - they all have audiences with a predisposition to ignore display advertising which impinge on their personal space.
Audience Composition (%): June 2008
From an audience perspective, Bebo is running a distant third in Australia, with a monthly active audience of between 600,000 and 700,000, compared to MySpace with more than 2m and Facebook with 3.2m (Source: Nielsen Online). Interestingly, anecdotal evidence suggests Bebo is regarded more highly than MySpace amongst the teen market for its ease of use and cleaner design. However, to this point, that hasn’t translated into a larger monthly audience, let alone one which carries a premium.
Here’s the point: AOL is in no position to afford Australia prime status in its Bebo network, hence it will increasingly find itself outgunned in the sales department relative to other local operations. AOL’s most recent incursion into Australia will probably be even shorter than its first.
August 1, 2008
One month into the new financial year and the news ain’t no better.
In the last two weeks, the VM Index has slipped a further 0.7% to close at 610.82 - that’s almost 40% down since early January 08.
There’s a poetic irony in the fact that as incumbent media (both analogue and digital) churn through the weeks and months seeking to reinvent their positioning, if not their actual offering, smaller artistic operations like the Nine Inch Nails are blasting holes in traditional media economics with their free music offering and high margin events. Such is life.
But I digress. The slight percentage change in the index hides some signficant shifts, both up and down, amongst the listed stocks. At the extremes, MacquarieMedia (MMG) rose 11.3% while Village Roadshow (VRL) fell 15.2%. In between, West Australian Newspapers (WAN) rose 9.6% and Wotif (WFT) was up 11%, while Austereo(AEO) fell 8.4%, along with Prime (PRT) down 7.4% and Seven Network (SEV) down 8.6%.
The permanance of this downard trajectory in the VM Index simply highlights the point that the reversal in negative sentiment in the media sector will take more than just a rosey press release on quarterly earnings. What’s needed is fundamental structural change, starting with a realisation by boards in London, Sydney, LA and Shanghai that the economics of scarcity is dead.
The bottom line: if you digitise your assets, prepare your company for two major impacts: retail pricing based on a zero marginal cost, and secondly, for an onslaught of hacker innovation, where individuals with far more skill at product innovation than internal teams, now set the agenda.
If musicians (not their labels) can get it, why not the princes of print or queens of screen?
Sadly, the market is beginning to realise the monarchy is dead.
July 11, 2008
The VM Index closed down a further 1.7% this week to 615.18. And for the first time in several weeks, a number of stocks closed in positive territory, such as APN up almost 16% to $3.45, followed by Austar (AUN) up 8% and Seven (SEV) up 7%.
But this wouldn’t be the VM Index if it didn’t contain some bad news. The majority of stocks continued an almost never-ending deterioration in value, with the largest drop reserved for Mitchell Communications (MCU), down more than 17% to $0.51. At the start of the year the stock sat at $1.09. Other negative positions included realestate.com.au (REA) and News Corp (NWS), both down 7.5%; Photon Group (PGA) down 7.7% and Fairfax (FXJ) down 6%.
With the index close to 600, it is perhaps too convenient to conclude the ‘end of the world’ for media-related groups. Instead, it is probably wiser to conclude that this is the start of a long-term realignment of industry fundamentals and company valuations. In other words, public media groups will simply have to re-adjust to the market’s re-rating of future earnings for mainstream media.
For investors who have held on for this long, their pain is acute, but for others who have not been previously exposed to media stocks, their are some real value opportunities in the sector - with one caveat - don’t expect prices to ever return to January 08 levels unless the relevant companies completely reinvent their corporate structure and core product offerings.
June 30, 2008
Six months after the VM Index began, and at the end of the 07/08 financial year the body count is massive. Ed Note: there’s no such thing as hyperbole in a market of this persuasion.
In that time, the index has dropped from its baseline of 1,000 to close at 625.99 - a decline of 37.4%. By comparison, Photon Group (PGA) lost 51.5% of its value over the six months, along with TEN down 49.6%, APN down 47.7%, Wotif (WTF) down 47.4% and Macquarie Communications ((MCG) down 42.7%.
No single stock lost less than 20% of its value in this period. Least affected were Consolidated Media (CMJ) down 21.4%, Crown (CWN) down 28.4%, Prime (PRT) down 28% and Macquarie Media (MMG) down 28.6%.
Generally speaking, no particular media segment seems to have been favoured by the market, with print groups hit equally as hard as ‘pure plays’ like REA, Wofit and Seek, along with broadcasters like TEN, Austereo, PBL and to a lesser extent Prime. The broad negative sentiment reflects pessimism around fundamentals associated with consumer discretionary spending, with very little discrimination between stocks based on their delivery platforms - be that digital spectrum, broadband or glossy Sunday magazines.
June 20, 2008
The VM Index has shed more than 80 points, or 11%, since 6 June 2008, dropping to 651.72. In short, valuations across the board have been decimated, leaving a distinct impression that, despite the broader market malaise, shareholders will be demanding new leadership in several quarters.
No stock experienced anything like positive territory at the close. The top three worst performing stocks included TEN down 27%, Wotif (WTF) down 16.9% and WAN down 13.7%. Both Fairfax (FXJ) and APN dropped by just over 13%, while the least affected included Village Roadshow (VRL) down just over 5% and Seek (SEK) down by 7.2%.
As the above graph illustrates, the ’skyline’ just keeps getting smaller and smaller. The once mighty media metropolis is looking decidely more modest these days.
June 7, 2008
The VM index slipped to 732.22 this week, down a further 2.06%. In terms of weekly performance, the index has averaged a decline of 1.7% every week since it began in January 08; there’s simply been very few examples of positive gain.
Stocks letting most of the water into the good ship media this past week include Wotif (WTF) -4.55%, Austar (AUN) -3.31%, realestate.com.au (REA) -2.91%, News Corp (NWS) -1.82% and Seven (SEV) -1.44%. The Photon Group (PGA) lost a massive 20% to finish at $3.20.
The high profile exit of several senior management figures at ninemsn did Consolidated Media no favours, causing its stock to drop more than 5% to $3.43.
Of interest, Seven’s close this week at $8.89 is the stock’s lowest point since early January.
On the flip side, both Seek (SEK) and Macquarie Communications (MCG) rose 2.06% and 4.49% respectively.
A quick snapshot to consolidate stock performances over the last 22 weeks shows Photon (PGA), the print group PMP and Mitchell Communications (MCU) have been the worst performing stocks in the index. Since January 08, each stock has lost 48%, 43% and 40% respectively of their market value.
In the US, the Dow Jones Media Index shed 3.4% this week, though making the point again, the trend for this index over the past 6 months has been highly volatile, with some significant gains as well as losses, mostly due to M&A deals (eg CNet) and takeover speculation (eg Yahoo!).
Source: Dow Jones Media Index: January 08 to June 08
May 22, 2008
The VM Index slipped by just under 1% over the past week, closing at 762.54.
Based on these latest numbers, this bring the value of our stock portfolio to $9,974, down from its original value of $13,080. Baring any merger and acquisition speculation in media circles, the resources sector will continue to draw investor dollars away from discretionaries over the forseeable future.
In the past week, strong upward swings were recorded by Austereo (AEO) up almost 10%, followed by Fairfax (FXJ) up 6.2%, Macquarie Media Group (MMG) up 5% and realestate.com.au (REA) up 3.9%.
Stocks which suffered signficant declines in price included PMP down 22%, Austar (AUN) down 6.3% and Crown (CWN) down 3.9%.
May 16, 2008
A strong motivator behind the IAB’s decision to appoint a professional executive is the enormous pressure felt by all publishers (at least those on the board) to ramp up display advertising revenues. The IAB wants a salesperson to spruik the performance advantages of the Internet over other media.
The relative decline in the growth of display revenues (against search and even classifieds) indicates why there is an urgency to prove why online display works. Rapid progress needs to be made in terms of building case studies and market evidence, or proof points, around the effectiveness of behavioural targeting technology. These issues are front and centre of the new CEO’s remit.
The perennial issue underlining all this is the quandry faced by publishers as to what proportion of their inventory is siphoned off to a third-party for rates which might be a few points ahead of the typical run-of-site rates given to a publisher directly. In other words, what is remnant and what is premium, or what proportion of pages should be sold by the in-house sales team?
The problem for most publishers, and the market generally, is that there isn’t enough premium inventory, or more specifically, quality content. This imbalance between premium and remnant pages is being exacerbated by the plethora of social networking sites. In fact, the market, particularly in the US, is so awash with remnant or poor quality pages, that eCPMs continue to be driven downwards to levels some argue are unsustainable even for ad network operators.
One of the US’s largest ad networks, PubMatic, has indicated that eCPM rates for a host of publishing sites are heading southward, some by very hefty margins.
Large web sites (>100m page views per month) have seen rates decline from 0.33 cents in February to 0.18 cents in April. This category includes that major social networking sites, which alone represent a 47% decline in the three month period, from 0.39 cents to 0.19 cents eCPM.
On the other hand, smaller niche sites have experienced an average rate rise of almost 15 cents, from $1.15 eCPM to $1.29 eCPM. In the case of small sites, ad networks are adding extraordinary value to the sales process because they improve the site’s eCPM rates while ensuring the site is not burdened with an expensive sales force of its own.
Other categories within the large website category to face rate declines include ‘entertainment’ down 17%, ‘gaming’ down 4% and ’sports’ down 5%. ‘Technology’ was fairly steady, with the eCPM rate shifting marginally from 83 cents to 82 cents.
Overall, the trend is a weakness in the monetisation of remnant inventory; a result of a substantial rise in the page impressions generated by social networks. The question that needs to asked here in Australia is what impact the localisation of such sites as Bebo and MySpace will have on remnant prices? Will they in fact further weigh down the growth rates for display advertising generally, and if so, how does a publisher like News Digital Media reconcile this conflict between the need to boost the local popularity of a global brand like MySpace (and in the process pump out huge quantities of page impressions) with its obvious requirement to maximise display revenues across the group by bolstering premium rates?
