The most addictive visual entertainment around these days is not on YouTube, wireless phones, Google Video or in theaters. It is good old-fashioned television, updated and reinvigorated for the late 2000s like no other mass medium on earth. Hello, artful, compelling and free Lost, 24, Prison Break and The Daily Show. Goodbye, reality-show geeks, video-cam amateurs and overpriced movies. Contrary to dire predictions of its imminent demise, scripted television is not dead yet, or even sleepy, as it enters a new season this week. Emerging from a do-or-die battle against the exodus of its audience to ad-skipping digital video recorders, iTunes and DVDs, episodic and comedic TV is in fact staging a dramatic comeback to reassert itself as a great moneymaker. And it's providing a nice pile of loot for corporate parents at broadcasters CBS ( CBS), Walt Disney ( DIS) and News Corp. ( NWS), and cable operators Viacom ( VIA), Time Warner ( TWX) and Comcast ( CMCSA). In tandem, the shares of most are rebounding after years in the wilderness.The good news for investors is that media stocks still have a long way to go to restore lost credibility and value, so there is still time to sock them away while ratings and earnings results are less attractive than they will be in a year or two.
See It NowWhat's changed? A few years ago, inexpensive, easy-to-operate digital recorders such as those from TiVo revolutionized viewing habits. But now television executives have rediscovered their sense of creativity and generated a new round of shows that beg to be watched fresh, not off a hard drive or DVD. The secret has been to create dramas replete with enough real mystery, quirky story lines, edgy acting and buzz that they function more like sporting events than predictable sitcoms. Much as you don't want to time-shift a live NFL playoff game, you wouldn't want to miss an episode of Lost. The idea isn't to create just "must-see TV" but "must see right now TV."
Channel StuffedAlthough this erosion sounds bad, it's not quite as lousy as expected. The most troublesome kink to overcome is a loss of ad pricing power, as supply and demand have misaligned. Look at the numbers: As the average number of TV channels per household in the U.S. has risen from 19 in 1985 to 96 in 2005, the amount of available ad inventory has jumped exponentially. Yet at the same time, the potential number of advertisers has plunged amid a wave of mergers among consumer products and services companies. Procter & Gamble ( PG) swallowed Gillette, SBC merged with AT&T ( T) and AT&T Wireless, Verizon Communications ( VZ) bought MCI, and Sprint Nextel ( S) bought Nextel in just the past two years.
Emotional FictionBehind 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|
|Walt Disney||$62 B||$34.80||$29.89|