Shirley Pelts

Valuation metrics In this part of the series, we’ll look at some key metrics investors can use to compare the values of media companies. Specifically, we’ll look at media valuation multiples. Some valuation metrics include the PE (price-to-earnings), EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), PCF (price-to-cash flow), and PFCF (price-to-free […]

The Channel 5 acquisition has led to Viacom (VIAB) gaining access to nearly 100% of the United Kingdom’s television audience, particularly for the Nickelodeon brand.

On May 20, The Walt Disney Company announced that Marvel’s Captain America: Civil War was set to surpass $1 billion in earnings at the global box office.

Netflix and Amazon’s Prime Instant Video service could be forced to ensure that 20% of their content catalogs consist of European content.

The Walt Disney Company’s (DIS) theme parks and resorts business is doing extremely well in the United States.

Comcast is increasingly focusing on its Business Services segment, which has three growth engines: small business, mid-sized business, and enterprise.

Time Warner stated at a Deutsche Bank (DB) investor conference early last month that it expects the number of movie screens in China to increase by about 30% in the next two years.

Disney stands out from its competitors in the media industry because of its vast intellectual property.

Disney’s Zootopia earned $23.5 million at the Chinese box office between February 29 and March 6, 2016, and was ranked second at the box office in China.

We prefer EV-to-EBITDA and PCF over the other multiples when comparing valuation of media conglomerates with different structures.

Time Warner’s (TWX) Warner Bros. had revenues of $13 billion in fiscal 2015, up by 4% year-over-year. However, Warner Bros. had a 13% year-over-year decrease in revenues in fiscal 4Q15.

Comcast’s (CMCSA) Cable Communications business had revenues of $12 billion in 4Q15, a growth of 5.9% over 4Q14.

At -$276 million, Netflix had negative free cash flow for the fourth straight quarter in 2015 as the company continued investing in original programming.

Disney expects the equity loss from its investment in Hulu to accelerate since Hulu is increasing its investment in acquiring original content from media companies and producing original programming.

Disney’s Media Networks segment was the biggest contributor to its revenue at 44% with segment revenues of $23.3 billion in fiscal 2015.

Netflix’s competition in the video streaming market is increasing. Amazon has taken several initiatives in the last year to expand its Prime Instant Video service to counter Netflix.

By offering different products like triple-play services, Comcast is catering to millennials, who want different content and can be heavy video viewers.

Comcast (CMCSA) has two primary business segments, Cable Communications and NBCUniversal.

In 1969, American Cable Systems was renamed Comcast Corporation.

The advertising revenues for Comcast’s (CMCSA) NBCUniversal Cable Networks and Broadcasting Television business are susceptible to advertising cyclicality and program ratings.

The advertising revenues for Comcast’s NBCUniversal Cable Networks and Broadcasting Television segment are susceptible to advertising cyclicality and program ratings.

Netflix has had difficulty in acquiring global streaming rights for content from media companies. This is due to its status as the sole buyer of streaming rights on a global basis.

Netflix considers Japan to be a brand-sensitive market. Once it establishes its brand, it expects its connection with the Japanese audience to be long term.

Hulu CEO Mike Hopkins said at an industry conference in Cannes, France, that Hulu was not looking to expand into international markets any time soon.

Currently, Hulu’s free service is ad-supported while its $7.99-per-month service provides content with fewer ads.

Disney’s (DIS) Media Networks segment was the biggest contributor to its revenue, at 44% or $52.5 billion, in fiscal 2015.

Time Warner announced its 3Q15 results on November 4, 2015. Warner Bros. was a major contributor to the revenue of Time Warner in 3Q15, accounting for 47%.

Netflix holds the content licensing rights to its original content, but this original content is currently produced by outside studios like Disney’s ABC Studios.

Disney is incurring significant pre-opening expenses for Shanghai Disneyland (FXI), which will be unveiled in spring next year.

The Walt Disney Company’s (DIS) advertising revenues made up 37% of its Media Networks segment’s total revenues of $5.7 billion in fiscal 3Q15.

ESPN is a part of Disney’s Media Networks segment. Affiliate fees are major component of this segment and are under pressure due to subscriber loss.

The Alliance for Open Media aims to develop video formats that have no royalty costs. The nature of the business makes royalty payments significant for companies like Apple and Google.

Hulu is planning to launch an ad-free service priced at $12–$14 per month later this year. Hulu is also looking at programmatic ad buying to better monetize its content.

The reasons for this movement of advertising from TV to digital media are varied. Millennial customers cut the cord on pay-TV or stopped subscribing to pay-TV altogether.

Netflix is grabbing eyeballs with its original content and taking advantage of an audience prone to hyper-consumption or binge viewing.

Netflix pricing is the lowest among all video streaming service players. Its basic plan of $7.99 is propelling the company’s streaming membership growth in the United States.

Disney uses a franchise-focused growth strategy that enables it to monetize its intellectual properties across its segments for a long time.

On June 29, Disney announced it will merge two of its stand-alone segments into one. Disney Consumer Products and Disney Interactive will become Disney Consumer Products and Interactive Media.

Disney’s Studio Entertainment segment had revenues of $1.7 billion in 2Q15, down 6% from 2Q14. The segment had operating income of $0.4 billion, a 10% fall from 2Q14.

The Walt Disney Company’s (DIS) Media Networks segment is the company’s largest segment in terms of revenue. It had 45% revenue share in 1H15.