Westwood Holdings Group, Inc. (NYSE:WHG), an asset management firm based in Dallas, Texas, has issued its latest research piece, “Is Media Content Still King?”
In the new piece, Tom Lieu and the rest of the Westwood Consumer/HealthCare team look at the way the internet and other technological advances have altered the media landscape. Most strikingly, while print and music have struggled to adjust to the changes, TV consumption has thrived.
Looking at media companies through what it terms the “three Cs”: Concentration of content ownership, Consumption of content, and Cost of content creation, the team notes how TV (video content ) companies are in an advantageous position with regard to all three.
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Companies that own high quality media content are well-positioned
The team concludes by writing:
“Westwood believes, and is positioning our portfolios accordingly, that companies that own high-quality content, durable franchises, and strong and prolific production studios are best positioned to thrive in this fluid and changing media environment.”
Westwood Holdings: Is Media Content Still King?
How we consume video and data content has changed dramatically over the past 10 years. In another 10 years, we are likely to see transformations that are even more drastic in our viewing capabilities. These rapid developments beg the question: what is driving this evolution? Which industries stand to benefit the most from near-term enhancements to content delivery? In the following piece, we will review the industry and discuss our thoughts on the winners and losers over the next few years. In addition, we focus on what separates TV/video content, the rationale for recent consolidation, and why Westwood Holdings Group, Inc. (NYSE:WHG) remains bullish on certain parts of the industry.
The Internet has dramatically changed the business model and economics for many companies in the media and entertainment industry. Specifically, online services have permanently altered the way consumers acquire, consume and create content. This evolution has been particularly painful for the newspaper, magazines, directories, and music industries, and to some extent, TV/radio broadcasters. The past decade was littered with companies that failed to adapt their business model to the new paradigm. Figure 1 looks at the stock performance of different “old” media companies over the past 15 years. As the chart shows, not all “old” media companies have struggled with performance and there has been a significant divergence in performance since 2009.
Media content: Diamonds Have Their Four Cs, We View Media Through Three Cs
We view the companies in the media industry through the lens of Three Cs:
- Concentration of content ownership,
- Consumption of content, and
- Cost of content creation.
Television Content Has All Three Cs
If diamonds are a girl’s best friend, TV (video) media companies have been investors’ best friends over the past five years because such firms can check the box on all three Cs. Specifically, not only is a majority of TV content and viewing today concentrated in the hands of a few media companies, but the cost of creating quality content is beyond the means of most potential new competitors, while new technology enhances the ability to consume content when desired. Let’s explore this further:
- Concentration — four media companies account for approximately 60% of TV viewing (revenues too!), while nine companies account for nearly 90%.
- Consumption — TV content consumption continues to rise, as shown in Figure 2, while viewing on traditional live TV is modestly declining. For example, timeshifted TV viewing (i.e. watching shows recorded on a DVR) increased significantly from the first quarter of 2012 to the first quarter of 2014; while, viewing on online video services (such as Netflix and Hulu) continues to grow at an impressive pace.
Figure 2: Total Monthly Viewing per User
See full Westwood Holdings: “Is Media Content Still King?” here.
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Westwood Holdings Group, Inc. (NYSE:WHG) provides investment management services to institutional investors, private wealth clients and financial intermediaries. Westwood manages a variety of investment strategies including U.S., Global and Emerging Markets equities as well as income-oriented portfolios. Access to these strategies is available through separate accounts, commingled funds and the Westwood Funds family of mutual funds. Westwood has significant, broad-based employee ownership and trades on the New York Stock Exchange under the symbol “WHG.” Based in Dallas, Westwood also maintains offices in Omaha and Toronto.