Tune In TV's Comeback

About half of the networks' annual inventory is sold in a one-month period during the summer, called the upfronts, when they make their customers commit money to the new season on the basis of previews, pilots and salesmanship. Long-term ad pricing has thus grown at nearly 5% a year -- a whopping 2.5 percentage points higher than inflation -- which has offset rating declines of 3.7%, according to Bernstein.

Entertainment conglomerates are capturing and retaining viewers via new means, such as episodic downloads at $1.99 a pop at iTunes; multi-DVD season sets at $50 to $75; and soon, on-demand viewing over broadband lines distributed by telephone carriers.

Emotional Fiction

Behind the resurgence is the dawn of the affordable big-screen TV, replete with multiple speakers and powerful amps. I cannot remember the last time my family went to see a movie in the theater.

With my 11-year-old daughter and 14-year-old son always on the run between school, soccer games and baseball practice, we enjoy huddling together in the den during a homework break or after dinner to watch a show like Lost in 42-inch, high-definition, high-fidelity splendor.

When I admit this to friends, I discover we're not alone. It turns out that few find any real entertainment value in the Internet, as it's an isolating, personal experience. As odd as it sounds, episodic TV with improved storytelling and production values today brings families together to share emotional fiction, amplifying the value to advertisers.

Shares of the major broadcasters have only just started to feel the love. Since 1998, the S&P 500 Index is up 33%, vs. a gain of 29% in CBS/Viacom, an 11% decline in News Corp. and a 3% decline in Disney, owner of ABC.

Since the start of 2006, however, the S&P 500 is up just 3%, vs. a 25% gain in Viacom, a 24% gain for Disney, a 21% gain for News Corp. and an 18% gain for CBS, which separated from Viacom this year.

TV 'Watch' List These TV-related stocks are must-see viewing
Company	Market Cap	5-Yr. High	9/1/06 Close
News Corp.	$19.5 B	$42.20	$20.06
CBS	$22.5 B	$29.20	$28.86
Walt Disney	$62 B	$34.80	$29.89
Comcast	$73 B	$45.80	$35.26
Viacom	$2.1 B	$90.00	$36.96
Source:MSN

In anticipation of a ratings improvement, more contributions from DVD sales and a streamlining of the rest of their far-flung businesses, I think the best values today are News Corp., which can go to $26 over the next year from its current perch at $20; CBS, which can go to $35 from $29; Viacom, which can go to $45 from $37; and Disney, which can go to $34 from $29. All of their dividends are negligible except for CBS, which yields 2.2%.

At the time of publication, Markman did not hold positions in any stocks mentioned in this column, although positions may change at any time.

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