More on Media from the Goldman Conference: Old vs. New

Last week’s Goldman Sach’s media investors’ conference was the subject of a recent Charles Schwab daily market email, to which I subscribe.

In part, it read,

“Investors could be forgiven for wondering if they had stepped into the wrong conference on Tuesday. Old media executives talked up digital strategies even as YAHOO warned of an unforeseen advertising shortfall. It appeared that old and new media companies had swapped roles for a day. While many blue chips slipped on Tuesday, a handful of media stocks rose after top executives at WALT DISNEY CO., VIACOM INC. and TIME WARNER INC. declared at the conference commitments to exploit the Internet to serve viewers anywhere, on any device. Meanwhile, Yahoo Inc. watched its shares fall after disclosing that two key advertising segments, autos and financial services, were weaker than expected. The panic selling of Yahoo appeared to do little to shake the resolve of media executives, some of whom once considered the Internet little more than an interesting sideshow. What's up for one-time Internet-skeptic NEWS CORP. next year? "To continue to drive into the digital transformation," Chief Executive Rupert Murdoch told investors. Murdoch's own stock on Wall Street has surged after buying one of the fastest growing Internet properties, MySpace.com, last year. Disney CEO Bob Iger took the opportunity to reveal it had sold $1 million of movie downloads on APPLE COMPUTER INC.'s iTunes in just a week.”

It does seem ironic that the “old” media companies are scrambling pell-mell to secure outlets for their aging content libraries, while the “new” media Yahoo was visibly weakened during the conference.

However, I don’t think Yahoo’s experience holds any import for the clutch of old media firms. As I have written here recently, Yahoo is probably the weakest of the “new” media firms, if you can rightly call it that. It doesn’t really offer content, what it does offer is mostly for free, and it isn’t really distribution, either.

Rather, what does not surprise me is that TimeWarner, Disney, Viacom and News Corp are frantically trying to sell or lease their video and audio content before it becomes eclipsed by the potential all-online production and distribution model.

Consider the prospect, in the current online environment, of some hot TV producers and rising new stars on YouTube going directly to consumers online with new films. It’s not as far-fetched as it may at first seem. Right now, on YouTube, one can view smart, interesting videos with great production values, running to more than 10 minutes. From there, it’s not a huge step into feature-length films. All it will take is some promotion on a YouTube channel, a URL, provision to take payments using PayPal, and broadcast and theaters have become disintermediated. A few years of this, and the content libraries of those old media titans will begin to be barren of recent goods, and only have aging stock gathering cyberdust.

Of all the old media names, I would hypothesize TimeWarner may be in the most precarious situation, this week’s analysts’ upgrades notwithstanding. As an owner of significant distribution and content assets, nobody trusts it. Other distributors can’t be assured of continued access to TW content. Other content providers worry that they will be locked out of, or given inferior access/terms, on TW’s cable systems. No company has managed consistently superior total return performance as an integrated media distribution and content firm yet. I doubt TimeWarner’s going to be the exception.

Add to this Apple’s impending release of iTV, about which I wrote here, and the downfall of old media becomes more likely. With an easy method of downloading new, online-marketed content from URL to PC, then, wirelessly to the Apple-provided, or one of its competitor’s, servers, and then via wires to consumers’ living room TVs, broadcast’s weakness becomes more glaring.

It’s really…well…entertaining, to watch the media sector change almost quarterly, as old media hurries to extract some value for its content, while new media distribution races ahead by allowing anyone to produce and market content, bypassing traditional media.

Dare I write, “stay tuned?”