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business newsThis Week in Media Stocks: Why Liberty Is Alluring, and About Those Netflix Rumors...
By
Steve Birenberg
Dec 14, 2011 3:00 pm
Netflix is in the news as yet another study reveals Americans are couch potatoes. We just have more to do on the couch these days. Maybe John Malone knows why.
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The key finding from eMarketer’s study is that the US remains a nation of couch potatoes. We are spending more time than ever in front of the TV, up another 13 minutes a day in the last year. However, the increase could be due to watching Netflix or other video options. In addition, we are multitasking more than ever, using our tablets and laptops to browse the Internet while watching our favorite programs and networks. We are also spending a lot more time with media in general, up 33 minutes to over 11 hours a day, a gain of nearly 5%. Most of the gain is driven by Internet usage, which now represents about one-quarter of our total time with media each day.
I suspect the Netflix rumors will come to nothing. Partnering with a media or communications company creates a lot of complications in terms of conflict with other content providers who are left out. On the other hand, as long as Netflix is writing big checks, most content providers are going to have a hard time saying no given challenges faced by traditional media in the Internet age. Regardless of how the Netflix saga turns out, it is no coincidence that eMarketer’s data reveals what it does. For better or worse, Netflix is the poster child that changed traditional media consumption.
Also of interest this week is breaking news that the German Cartel Office, apparently an equivalent to our Department of Justice or Federal Communications Commission when it comes to media merger approval, is likely to grant conditional approval for Liberty Global’s (LBTYA) proposed acquisition of the No. 3 cable company in Germany.
Liberty Global already owns the largest cable company in Germany. Even in the face of the crisis in Europe, German households are finally buying digital TV and high-speed Internet access. For a long time, frugal Germans stuck with low-end cable TV packages. The sudden interest in the cable’s bundled offerings makes Germany one of the best markets for cable operators in the world.
Deutsche Telekom (DTEGY.PK), the incumbent telco, is competing in multichannel TV, but the competitive environment, even with the aggressive competition of Sky Deutschland (SKDTF.PK), is not as tough as in the US or UK. Approval of the deal, even with conditions, is a major positive for Liberty Global, one of my favorite media stocks.
Besides more upside in the growing German market and cost-saving merger synergies, Liberty Global offers high free cash flow and aggressive share repurchases. The stock has been struggling recently due to worries about being primarily a European company, albeit northern European, where economies are holding up better. The stock is not up much so far in response to the rumored regulatory approval, making it an especially good buy today.
As long as I am mentioning one of John Malone’s Liberty’s, I might as well note that the newly constituted Liberty Media (LMCA) is looking awfully attractive. The shares have barely budged since Liberty Starz and Liberty Capital merged to form Liberty Media. This is true even though Sirius XM (SIRI) has been pushing higher and is near multimonth highs.
Liberty Media owns 40% of Sirius XM, which makes up about 40% of Liberty Media’s net asset value. One would think that with Sirius XM on the rise and the supposed tracking stock discount that was in place on Starz and Capital, Liberty Media would be trading higher. Not so, which sets up another good buying opportunity in a Malone entity.
Disclosure: LMCA is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, an SEC registered investment advisor. LMCA and LBTYK are net long positions in the Entermedia Funds. SIRI is a net short position in the Entermedia Funds. The Entermedia Funds are long/short equity hedge funds focused on media, entertainment, communications, and related technologies. Steve is co-portfolio manager of Entermedia, owns a stake in Entermedia’s investment management company, and has personal monies invested in the Funds.
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Positions in LMCA, LBTYK, SIRI
Entermedia is a long/short equity hedge fund focused on media, communications, and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the Funds’ investment management company, and has personal monies invested in the Funds. CBS and Discovery Communications are widely held by Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment advisor.
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Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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