Very recently, I had a conversation with a small market broadcaster. In a moment, you will see why I will not identify him nor his markets or whether he operates in TV or Radio.
He called me and said that his media company was struggling. He said essentially that his net worth was suffering from a case of STRANDED ASSETS. “Don, you probably do not know what that means”, he told me. “No, I know exactly what it means.” That was not good enough for him. He said that I needed to define it. I was not thrilled but rattled off a definition that any MBA would be proud to call his/her own. For you non-wonks, a stranded asset is “an asset that is worth less on the market than it is on a balance sheet due to the fact that it has effectively become obsolete in advance of complete depreciation."
In other words, my acquaintance has broadcast assets with a listed value but he knows they may never see the light of day in the real world if he wants to sell. And he does. He is getting older as we all are and thought that selling his properties would provide him with a platinum parachute in his golden years. This is somewhat analogous to several million people in 2008-2010 who were “underwater” on their mortgages. They owed more on their mortgages than they could sell their homes for. Some walked away, others went bankrupt, but many simply stayed put and dug themselves out of a huge hole over several years. The broadcaster appreciated the analogy but was clear that his small market properties would never bounce back as the real estate market has done to a certain degree.
We then went in to a lengthy and at times amusing conversation about how his bailout position may be a “greater fool”. The Greater Fool Theory is a an equity market term that is, in essence, a crazy idea. It is the opposite of the Graham/Dodd/Buffett/Munger approach of investing in the fundamentals of a company. When the greater fool theory is in evidence be if for a stock, a house or a business, the buyer knows that the price one is paying is unjustifiably high but the buyer does not care as he/she is convinced that the price of the asset is going up and fast. The speculator, I cannot stomach calling him an investor, sells when the asset pops up to another bozo whom we shall dub the greater fool. There have been greater fool purchases throughout my life and even in recent history particularly in the tech bubble and highly leveraged real estate.
The broadcaster talked at length and his candor was refreshing. He doubted he could rustle up a “greater fool” to buy his properties. I countered that just as everyone and his brother think that they can run a restaurant and most fail miserably, there has to be a small but passionate group who think that they could run a TV or Radio station profitably even in today’s environment. He thanked me for my time. Really, I think that all he wanted was someone to listen.
My caller is a survivor. I am confident that he will work his way through things somehow. Yet, what gnaws at me is how many others are out there in a similar boat in the media and advertising worlds? Are stranded assets a silent burden that many are carrying?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
Wednesday, June 27, 2018
Wednesday, June 13, 2018
Silicon Valley Wisdom
I was doing a bit of digging recently and found that the term Silicon Valley is a good but older than I imagined. While there is a lively dispute going on regarding who coined the term, it appears that Don Hoefler was the first person to use the term “Silicon Valley” in the printed word. That was way back in 1971 which surprised me. Prior to that, many people appeared to refer to the tech area as “Silicon Gulch.”
As the years have passed books have been written about the nuggets of wisdom coming from Silicon Valley. They may be attributed to Steve Jobs, Steve Wozniak, Mark Zuckerberg, a number of venture capitalists and many other tech players. Someone asked me this past week which comment had the most staying power with me. I am embarrassed to say that I do not know the man or woman who first said it but it goes as follows: “We overestimate what can be done in three years, and underestimate what can be done in 10.”
Think about that line for a few moments. To me, it so dead on that it is almost eerie.
To the graybeards reading this—Remember when cable first began as an advertising medium? Some suggested that the major over the air networks were going to dry up and blow away. Clearly, it did not happen in three years but a decade later, the networks had lost substantial audience share and ad dollars began a shift as well.
The same thing happened with early online activity in late 1999 and early 2000. When the dot.com crashed occurred, online suffered a setback but came roaring back a few years later and, by 2010, only neanderthal advertisers did not have some digital in the mix. How about 2009-2010? If someone wanted to look intelligent in a meeting, the magic word, sometimes whispered, was Facebook. I am convinced that they picked up much too much advertising revenue early on in their development. Did it work? Few knew and sadly, some did not care. They wanted to appear cutting edge.
Look back, if you will, ten years. Think of the things that you do now as a matter of course that you would not have thought of years ago. Netflix streaming? Watching video on your phone? Texting like crazy at age 70? Making bank deposits via your device? These lifestyle changes have been remarkable and we would all regret losing them.
My point is that we, in the media world, need a long term perspective. We need to be flexible and always remember that we will be surprised at both what will happen and what will not.
The great Danish theologian, Soren Kierkegaard, wrote in “Either/Or”—“he who becomes wedded to the spirit of the times soon becomes a widower.” So, embrace change, but do not do a complete 180 degree turn on media mix. Over a decade, absolutely. But constantly shifting gears as we move in to new platforms seems to be a winning approach.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmaill.com or leave a message on the blog.
As the years have passed books have been written about the nuggets of wisdom coming from Silicon Valley. They may be attributed to Steve Jobs, Steve Wozniak, Mark Zuckerberg, a number of venture capitalists and many other tech players. Someone asked me this past week which comment had the most staying power with me. I am embarrassed to say that I do not know the man or woman who first said it but it goes as follows: “We overestimate what can be done in three years, and underestimate what can be done in 10.”
Think about that line for a few moments. To me, it so dead on that it is almost eerie.
To the graybeards reading this—Remember when cable first began as an advertising medium? Some suggested that the major over the air networks were going to dry up and blow away. Clearly, it did not happen in three years but a decade later, the networks had lost substantial audience share and ad dollars began a shift as well.
The same thing happened with early online activity in late 1999 and early 2000. When the dot.com crashed occurred, online suffered a setback but came roaring back a few years later and, by 2010, only neanderthal advertisers did not have some digital in the mix. How about 2009-2010? If someone wanted to look intelligent in a meeting, the magic word, sometimes whispered, was Facebook. I am convinced that they picked up much too much advertising revenue early on in their development. Did it work? Few knew and sadly, some did not care. They wanted to appear cutting edge.
Look back, if you will, ten years. Think of the things that you do now as a matter of course that you would not have thought of years ago. Netflix streaming? Watching video on your phone? Texting like crazy at age 70? Making bank deposits via your device? These lifestyle changes have been remarkable and we would all regret losing them.
My point is that we, in the media world, need a long term perspective. We need to be flexible and always remember that we will be surprised at both what will happen and what will not.
The great Danish theologian, Soren Kierkegaard, wrote in “Either/Or”—“he who becomes wedded to the spirit of the times soon becomes a widower.” So, embrace change, but do not do a complete 180 degree turn on media mix. Over a decade, absolutely. But constantly shifting gears as we move in to new platforms seems to be a winning approach.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmaill.com or leave a message on the blog.
Thursday, June 7, 2018
A Dead Cat Bounce in Legacy Media?
There are many sayings in Wall Street lore that I love and have used to make a point over the years. One of my favorites is the “Dead Cat Bounce.” What this means is a temporary recovery of the share price of a company that has taken a real shellacking of late. For example, a stock was at 100 and dropped to 30. It then jumps back for a brief time to 35 as short-sellers cover and then continues its downward slide. Wall Street analysts will sometimes say “Even a dead cat will bounce if it is dropped from high enough.” At the risk of offending the cat lovers among my readership (I am an enthusiastic dog guy), I think an argument can be made that a dead cat bounce might be in evidence in the conventional media world these days.
Several years ago, newspapers were essentially left for dead. Many are still struggling. The two leaders, THE NEW YORK TIMES and THE WASHINGTON POST, are currently enjoying something of a revival. The TIMES now has over 2.5 million digital subscribers and revenue is up from subscriptions although advertising is still struggling. The Wall Street Journal has nearly 1.3 million subscribers while the POST has recently crossed the 1.0 million mark after a spirited marketing effort. Some say the POST has been energized by Jeff Bezos who has added a large number of reporters and a financial cushion. One reader told me (and I disagree) that the paper has been much helped by the release of Steven Spielberg’s film, THE POST.
How about MSNBC? Its ratings have soared over the last year and do not forget the late night talk shows. Jimmy Kimmel, Trevor Noah, and Seth Myers all seem to have a new lease on life and they appear to be having the time of their lives each night.
Why? Well, it seems that we have a controversial person in the White House. The papers have lots of material to work with and are turning investigative reporters loose as our the cable channels. The comics are doing some wonderful political satire and some of their material is hilarious. Saturday Night Live seems more vibrant that it has been in decades and big name talent appear to be lining up to do cameos. Two on air talents, Bill Maher and Samantha Bee, to me, have crossed the line of propriety with their comments.
So the question I have for you is the apparent chaos in the White House and Congress the real reason for the renewed vigor of these media properties? If someone else is president on January 20, 2021 will these legacy media properties and formats continue their relentless slide of recent years? Is their current buoyancy real or is it a media version of a “dead cat bounce.” Will newcomers stick with them for the long haul?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Several years ago, newspapers were essentially left for dead. Many are still struggling. The two leaders, THE NEW YORK TIMES and THE WASHINGTON POST, are currently enjoying something of a revival. The TIMES now has over 2.5 million digital subscribers and revenue is up from subscriptions although advertising is still struggling. The Wall Street Journal has nearly 1.3 million subscribers while the POST has recently crossed the 1.0 million mark after a spirited marketing effort. Some say the POST has been energized by Jeff Bezos who has added a large number of reporters and a financial cushion. One reader told me (and I disagree) that the paper has been much helped by the release of Steven Spielberg’s film, THE POST.
How about MSNBC? Its ratings have soared over the last year and do not forget the late night talk shows. Jimmy Kimmel, Trevor Noah, and Seth Myers all seem to have a new lease on life and they appear to be having the time of their lives each night.
Why? Well, it seems that we have a controversial person in the White House. The papers have lots of material to work with and are turning investigative reporters loose as our the cable channels. The comics are doing some wonderful political satire and some of their material is hilarious. Saturday Night Live seems more vibrant that it has been in decades and big name talent appear to be lining up to do cameos. Two on air talents, Bill Maher and Samantha Bee, to me, have crossed the line of propriety with their comments.
So the question I have for you is the apparent chaos in the White House and Congress the real reason for the renewed vigor of these media properties? If someone else is president on January 20, 2021 will these legacy media properties and formats continue their relentless slide of recent years? Is their current buoyancy real or is it a media version of a “dead cat bounce.” Will newcomers stick with them for the long haul?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, June 1, 2018
A New Lost Generation?
The group of people who came of age during World War I (1914-1918) were sometimes referred to as “The Lost Generation”. The term was popularized by the great author Ernest Hemingway and was front and center in his 1920’s novel, THE SUN ALSO RISES.
Some sociologists characterized this group as being disoriented, wandering and directionless. A bit harsh, I would say. Yet, looking at some recent demographic data, I wonder if a 21st century Lost Generation is emerging 100 years later.
What am I referring to is the millions of young Americans who are hamstrung or perhaps handcuffed by student loans and are struggling to repay them. The average student loan now rests at $34,000 and many young adults with unusually high balances are on 20 year payment plans to retire them. Some unscrupulous lenders came in at almost predatory interest rates and added fuel to the fire although they are not as prominent today. According to recent data and projections provided by the Brookings Institution, many who owe are in default. There is a unique and scary divide on defaults. A stunning 47% of people with loans to fund education at a for-profit institution are in default. Conversely, 13% (still too high) are in default if the loan was for schooling at a non-profit center of higher learning. Also, the Brookings data showed that many people default after many years of dutiful payments. Some people pay for a dozen years and then fall off the ability to pay. Brookings projects that as many as 40% overall could be in default by 2023. How is that possible? Here is my theory: our economy has been in recovery after a terrible downturn in 2008 aka The Great Recession. At some point, a downturn is inevitable. When it hits, a few million young people who have been struggling to make their monthly payments may default as many will be hit with either short term or perhaps long term unemployment.
Just how big is the total of Student Loan debt? The figure bandied about these days is $1.4 trillion. Here are some data compiled by the New York Federal Reserve Bank for January, 2018 which pegs student loans as the 2nd largest category of loans in the U.S. Details are:
Home Mortgages $8.7 Trillion
Student Loans. 1.34 Trillion
Auto Loans. 1.19 Trillion
Credit Card Debt 784 Billion
Home Equity Loan 412 Billion
Some crazy things are going on in an effort to prevent defaults. Some 22 states will pull licenses for nursing, medical technicians, doctors, and even teachers certifications if you have missed a certain number of payments. Three states—Montana, Iowa, and Oklahoma have suspended drivers licenses to those in default. Really? In rural areas, how do you get to work where there is no public transportation? Does a friend give you a ride every day? C’mon. The states are sensitive about the drivers license issue and say that it is rarely enforced. How does a nurse pay back her debt when she can no longer work as a nurse? It is a classic Catch-22. Remember, even if you declare bankruptcy your student loans are not forgiven so people cannot “game the system” that way.
Some people say that student loans are harmful to the economy. On a short term basis, that strikes me as sheer idiocy. The money does not sit there. It goes to schools for tuition, room and board and greedy book publishers pick up some funds. That money goes to pay salaries and maintenance at the institutions. Long term, I do believe the approximately $1.4 trillion and growing will be a drag on the economy. Some four out of 10 recent graduates stay living with their parents for a few years to allow them to buy a vehicle and pay down some of the debt until a raise or two or a better job arrives. Some 78% of millennials with student debt state that they cannot save for a downpayment on a home. A full two thirds say that they do not feel secure. I could not find figures on this but I am curious as to how many with student debt bypass 401k’s at their place of work until the balance is worked down. Your 20’s and early 30’s are key capital formation years and if you miss the first 12-15 years, you will never catch up with your debt free colleagues.
Solutions? Some have suggested that you pay back as a fixed percentage of earnings. So, a young investment banker with six figure debt can pay it back faster by kicking in a fixed percentage of income each year while a lower paid worker can stretch out payments for a longer period . Others suggest retiring a portion of the debt if you work in public service areas such as teaching, government or nursing. My mild suggestion is that people need to know what they are signing. A lot of people who seem to get in to the most trouble are first generation college students. They have been told that a university degree is a ticket to prosperity. I have met a few canny students who have thumbed their noses at loans and take six-seven years to get their undergraduate degrees. They work either full time and take night classes or sometimes skip a semester and work 50 hours a week to pay the next semester or year in full. They do miss out on the “college experience” to a certain degree but they have no financial millstone around their necks. Also, they tend to attend state schools and with in-state tuition are provided with good value.
I feel for these fine young people. They cannot work a nice summer job and even begin to cover or largely cover expenses as they did in my day. Many will (sadly) become angry and bitter if things do not go their way.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Some sociologists characterized this group as being disoriented, wandering and directionless. A bit harsh, I would say. Yet, looking at some recent demographic data, I wonder if a 21st century Lost Generation is emerging 100 years later.
What am I referring to is the millions of young Americans who are hamstrung or perhaps handcuffed by student loans and are struggling to repay them. The average student loan now rests at $34,000 and many young adults with unusually high balances are on 20 year payment plans to retire them. Some unscrupulous lenders came in at almost predatory interest rates and added fuel to the fire although they are not as prominent today. According to recent data and projections provided by the Brookings Institution, many who owe are in default. There is a unique and scary divide on defaults. A stunning 47% of people with loans to fund education at a for-profit institution are in default. Conversely, 13% (still too high) are in default if the loan was for schooling at a non-profit center of higher learning. Also, the Brookings data showed that many people default after many years of dutiful payments. Some people pay for a dozen years and then fall off the ability to pay. Brookings projects that as many as 40% overall could be in default by 2023. How is that possible? Here is my theory: our economy has been in recovery after a terrible downturn in 2008 aka The Great Recession. At some point, a downturn is inevitable. When it hits, a few million young people who have been struggling to make their monthly payments may default as many will be hit with either short term or perhaps long term unemployment.
Just how big is the total of Student Loan debt? The figure bandied about these days is $1.4 trillion. Here are some data compiled by the New York Federal Reserve Bank for January, 2018 which pegs student loans as the 2nd largest category of loans in the U.S. Details are:
Home Mortgages $8.7 Trillion
Student Loans. 1.34 Trillion
Auto Loans. 1.19 Trillion
Credit Card Debt 784 Billion
Home Equity Loan 412 Billion
Some crazy things are going on in an effort to prevent defaults. Some 22 states will pull licenses for nursing, medical technicians, doctors, and even teachers certifications if you have missed a certain number of payments. Three states—Montana, Iowa, and Oklahoma have suspended drivers licenses to those in default. Really? In rural areas, how do you get to work where there is no public transportation? Does a friend give you a ride every day? C’mon. The states are sensitive about the drivers license issue and say that it is rarely enforced. How does a nurse pay back her debt when she can no longer work as a nurse? It is a classic Catch-22. Remember, even if you declare bankruptcy your student loans are not forgiven so people cannot “game the system” that way.
Some people say that student loans are harmful to the economy. On a short term basis, that strikes me as sheer idiocy. The money does not sit there. It goes to schools for tuition, room and board and greedy book publishers pick up some funds. That money goes to pay salaries and maintenance at the institutions. Long term, I do believe the approximately $1.4 trillion and growing will be a drag on the economy. Some four out of 10 recent graduates stay living with their parents for a few years to allow them to buy a vehicle and pay down some of the debt until a raise or two or a better job arrives. Some 78% of millennials with student debt state that they cannot save for a downpayment on a home. A full two thirds say that they do not feel secure. I could not find figures on this but I am curious as to how many with student debt bypass 401k’s at their place of work until the balance is worked down. Your 20’s and early 30’s are key capital formation years and if you miss the first 12-15 years, you will never catch up with your debt free colleagues.
Solutions? Some have suggested that you pay back as a fixed percentage of earnings. So, a young investment banker with six figure debt can pay it back faster by kicking in a fixed percentage of income each year while a lower paid worker can stretch out payments for a longer period . Others suggest retiring a portion of the debt if you work in public service areas such as teaching, government or nursing. My mild suggestion is that people need to know what they are signing. A lot of people who seem to get in to the most trouble are first generation college students. They have been told that a university degree is a ticket to prosperity. I have met a few canny students who have thumbed their noses at loans and take six-seven years to get their undergraduate degrees. They work either full time and take night classes or sometimes skip a semester and work 50 hours a week to pay the next semester or year in full. They do miss out on the “college experience” to a certain degree but they have no financial millstone around their necks. Also, they tend to attend state schools and with in-state tuition are provided with good value.
I feel for these fine young people. They cannot work a nice summer job and even begin to cover or largely cover expenses as they did in my day. Many will (sadly) become angry and bitter if things do not go their way.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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