NEW YORK ( TheStreet) -- For well over a year now, I've beat the drum on big media stocks.I recently took profits on three names: Time Warner ( TWX), Rogers Communications ( RCI) and BCE, Inc. ( BCE). TWX data by YCharts
I am about to sell the shares of Viacom ( VIAB) I hold long in my daughter's custodial account for a, presumably, double-digit profit. More than simple profit taking drives the VIAB decision. I'm concerned about the company. We know ratings at Nickelodeon have been hurting for a while. Some blame SpongeBob; others the convenience of KidsTV on Netflix ( NFLX). While it's likely a mix of both, something bigger looms. A larger-than-the-sum-of-its-parts trend. From The Wall Street Journal comes word that it's not just Nick. Numbers at MTV and Comedy Central are down as well. In fairness, the WSJ reports that Time Warner and Comcast ( CMCSA) have seen similar ratings' declines at TBS and USA Network, respectively. Chalk these decreases up to several very real reasons -- warm weather late in the year in much of the country, impact of streaming/on-demand, the home stretch of the baseball season and the start of football. These things all play a role, however, as I see it, it's the final two sports-related explanations that tell the tale at Viacom. Simply stated, Viacom doesn't have meaningful sports programming to speak of. It's not like it's filmed entertainment division (Paramount) has been picking up the slack for lackluster network performance. We'll see how the most recent quarter plays out (Viacom reports on Nov. 15), but for the third quarter of 2012, global revenue tanked 14%. The company blames a strong third quarter in 2011, fueled by beneficial timing of programming and new releases, for the shortfall. I'm not quite sure I buy it. A stock I am now accumulating, News Corp ( NWSA), performed well and appears set to move higher if you dig deeper into its wimpy 1% year-over-year revenue increase for the fiscal fourth quarter, which ended in June.
First, News Corp reported 26% growth in its cable networks division. This offset weakness in its other businesses, particularly publishing, which was off nearly 49% year-over-year. News Corp plans to spin off its publishing segment, which should help unlock value in its core television and film areas. Don't be surprised if the company eventually disposes of publishing altogether (or completely retools it). That's a move I hope Time Warner considers as well. I remain bullish NWSA and TWX because of their relative outperformance on the cable side, but also because they currently air and recently inked long-term major professional sports contracts. For example, earlier this month News Corp's Fox and Time Warner's Turner locked up Major League Baseball for the next 8-9 years. That's something Viacom does not have: Appointment viewing, particularly sports. And this becomes more of a liability every day. Consider the moves Comcast has made. It controls and owns a 51% stake in NBCUniversal ( General Electric ( GE) owns 49%). It raised the stakes when it introduced NBC Sports Network on New Year's Day 2012. Now, NBCUniversal secures multi-year U.S. rights to English Premier League (EPL) soccer. NBCUniversal will use NBC, NBC Sports Network, NBCSports.com as well as the Spanish-language Telemundo to air the games. (I first saw this story via Ed Shermna's excellent Sports Media Report). This is a major coup for CMCSA. The company snags a sport with a growing U.S. following and dings News Corp's Fox and Disney's ( DIS) ESPN in the process. EPL is valuable across the globe. Earlier this year, rumors indicated that Apple ( AAPL) and Google ( GOOG) led the bidding for EPL rights in the United Kingdom. From a long-term standpoint, big media that embraces multi-platform delivery and controls key sports -- RCI, BCE, TWX, DIS, NWSA, CMCSA -- remain strong buys. In the near term, I expect NWSA to show strength as the spinoff nears. The company reports earnings on 11/6. CMCSA hit a 52-week high, intraday, Friday. I'll wait for a pullback and start a position.
I'm selling VIAB. They need to produce too many hits across too many properties to win without sports. More focused niche brands such as HBO can do this. But there's just no way Viacom can win across the board. In this environment, it pretty much has to. At the time of publication, the author had positions in NWSA and VIAB. He intends to sell VIAB this week after the market reopens and consider a long position in CMCSA. Follow @RoccoPendola