Paging Activist Investors to the Media Industry

It’s no secret that people are deserting television in droves, cord-cutters, who the level of those never signing up for cable, never-corders, remains high. 

The trend is undeniable, this is not just a fad. 

Yet, writing off the entire industry and comparing it to traditional print media might be a bit premature, especially if you ask Jeff Ubben — the ValueAct Capital founder has been investing more of his fund into 21st Century Fox (FOX). 

Even still, media stocks have been bleeding since the start of August, with FOX shares down 20% since ValueAct went active on the name. CBS is down 30% over the last three months, Viacom off 43% and Time Warner Inc. down 18%. 

The big culprit, though, has been Disney — which is only down 13% for the last 90 days. However, it was its announcement of a slowdown in Pay-TV subscribers that really sent the industry in a frenzy. 

No fear, or so says Jeff Ubben. He might be right, but there’s no denying the structural decline within the pay-TV space that we’re about to witness. With paying subscribers dwindling, advertisers can put their money to better use elsewhere.

But where are these people going? To non-ad platforms, which create a unique opportunity for other, non-video perhaps, platforms to take the torch. 

Still — the best way to stave off extinction is to consolidate. Comcast (CMCSA) is leading the way here by making investments in the likes of Vox and BuzzFeed. They also tried to buy up Timer Warner Cable (TWC). They failed, but Charter Communications (CHTR) was waiting in the wings.

Within the content creating space is where I think we’d all like to see some action. Perhaps not Jeff Ubben — as he’s likely content with making money off the Fox buyback. He’s also made comments that Fox’s run at Time Warner Inc. was unwarranted. 

However, Viacom and others can’t sit idly by forever. Viacom is getting punished the most in the industry, and being dubbed a structural short. The re-consolidation of CBS (CBS) and Viacom is what some of Wall Street is pining for, but there’s no shortage of how an M&A frenzy could play out. Sumner Redstone’s days are numbered in terms of controlling CBS and Viacom’s destiny, and who wouldn’t want to see a premium TV monopoly created — a bringing together of CBS’ Showtime and Time Warner’s HBO. 

Activist investors are likely watching the frenzy with open minds, including the media hungry Dan Loeb. Dr. John Malone also has hungry eyes.

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