Media Spotlight Swings Away From Content

In a Dec. 31 report, Morgan Stanley analyst Rich Bilotti concludes that distribution assets will appreciate more quickly than content assets over the next three years, a "tectonic shift" creating conditions last seen in the late 1980s.

One factor behind the valuation shift, says Bilotti, is the Comcast-AT&T deal, whose bargaining power he summarizes neatly: "Comcast could survive the deletion of one channel, but most programming networks could not survive the loss of a carriage agreement covering 21-22 million subscribers." Also driving up distribution value, he says, is a trend forecast as well by Shapiro: content conglomerates will move to acquire and consolidate distribution assets. Finally, says Bilotti, advertising growth will be 4% to 6% annually for the next several years, "not likely to be strong enough to offset the loss of pricing power for content."