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Monday, January 26, 2009

Will It Be Different This Time?

Since I was in college (a long time ago), I have been reading hundreds of books about the stock and commodity markets. One thing always stands out every few years. Some one writes a hot new bestseller about how "this time it is different" and a certain category of stocks will go to the moon.

I saw it with the "Nifty 50" in the late "60's ( advice was buy Polaroid and hold forever), gold in 1980 (it hit $850 an ounce and then fell to $280 and took 28 years to rebound), virtually all stocks in 1986-87 (crashed in October, 1987), the Internet craze of 1999-2000, and the real estate boom of the new century that the entire economy is paying for now. Clearly, a lot of booms and manias are caused by people believing that the good times will last forever. If I have learned one thing the last forty years about the capitalistic economic road it is simply that markets always go to extremes. When people say that this time it is different, it should serve as a warning bell for all to get liquid and wait for some reversion to the mean that corrects pricing back to more modest levels.

What does all of this have to do with the world of media? Well, the more that I think about it maybe it WILL be different this time for media (definitely not for the stock market). Here is where I am coming from: over the last several weeks everyone that I speak and correspond with is talking about how bad things are in both the print and broadcast marketplaces. No argument from anyone seems likely on that point. But broadcasters, eternally optimistic, keep saying that when the economy snaps back and big players, especially domestic auto, returns to the airwaves, all will be well.

I do not feel qualified to comment on the future of the Big Three in Detroit. But, to me, the broadcasters are forgetting something. All through this dramatic ecomomic downturn people continue to abandon broadcast TV and newspaper, and to a lesser extent, radio. The fragmentation continues to march across all major media but outdoor. So, when we do get a return to normalcy whether it is later this year or in 2010 or, sadly even 2011, the playing field will look and feel different.

Some local advertisers will be out of business. Others will have experimented with more digital advertising and will have a healthy component in streaming video and will never go back to an 80% broadcast, 20% local cable mix.

I remember the recession of 1974-75. We suffered from the three I's--inflation, interest rates, and impeachment (Richard Nixon). When the economy came back, the broadcast market roared. Some DMA's saw cost per points jump 40-50%. Today's economy strikes me as worse than those difficult times. But structurally, the media world is undergoing changes over the next one to three years that will cancel out a dramatic surge when the good times roll again. So, for the media world, at least, this time it REALLY is different.

You can contact Don Cole directly at doncolemedia@gmail.com

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