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12 Mar 2009

Big Media: The Bigger They Were, The Smaller They Now Look

by: Ashkan Karbasfrooshan

This post should be titled: Screwed If You Do. Screwed If You Don’t, or better yet, We Tech Bloggers Are a Bunch of Hypocrites!
Was it not just a few months ago (technically, quarters) when we lambasted “big, dumb, slow, old media” for not doing enough M&A of online assets?

My, my, how times have changed. Looking at CBS’ stock chart:

Erick Schonfeld over at TechCrunch comments:

Consider, for example, that CBS’s entire market capitalization is now only $2.5 billion, which is not much more than the $2.1 billion its digital division CBS Interactive paid in cash over the past two years for Cnet ($1.8 billion) and Last.fm ($280 million). (It also made a number of other smaller acquisitions and investments). As of December 31, 2008, CBS only had $419 million in cash on its balance sheet.

When it bought Cnet last May, CBS’s market cap was $16.5 billion. If CBS had instead paid in stock for CNET, that stock would be worth only $273 million today—less than what CBS paid for Last.fm two years ago.

Imagine of they had merged with Facebook in a 1-for-1 stock deal (when CBS was worth $16B and Facebook got its implied $15B valuation)? Or for that matter, imagine had they paid a billion dollars for Bebo. Oh, wait. Someone did.

However, I think it’s unfair to be too critical in hindsight. Sure, prices have come down, but while online media will return with a vengeance, the same cannot be said about offline / traditional media. Print media is a leading indicator of what TV media can expect, look at McClatchy’s stock price:

What’s crazy here is the 52-week range. The stock is now at less than $0.50/share, but it was as high as $11.21 over the past year. So if the company - the third biggest newspaper company in the US, mind you - is now sporting a paltry $40M market cap, then just a year ago it was valued at $1B!

This being said, if I were traditional media, I’d be buying up more and more online assets because prices and expectations have probably gone down, but not as much as traditional media revenues have. If I am CBS (or News Corp., Time Warner, Viacom, etc.), I would not expect the trend to change.