On July 12th, THE WASHINGTON POST published an article by Phillip Bump in their political section that, in many ways, was right in my wheelhouse. It discussed demographics 20 years from now. The point was that by 2040, eight states will have nearly half (49.5%) of the U.S. population. Add the next eight most populous states and that will be home to nearly 70% of Americans. So what, you may say. Well, clearly, young people want to go where the jobs are and where the action is. Living in rural areas has little appeal especially in those areas that are getting grayer and actually losing population. The author then talks about how this seismic shift, which strikes me as a demographic tidal wave, will put us in an odd situation. His thesis is that the U.S. House of Representatives will likely get far more progressive in nature as today’s millennials pile in to the 16 most populous states. Conversely, the U.S. Senate may get far more conservative as, even states that are losing members of the House and may join the handful now that only have one at-large House member will still have two U.S. Senators. His projection, and I have seen others that are similar, is that 30% of the population will control some 68% of the U.S. Senate seats. (A link to the article is https://www.washingtonpost.com/news/politics/wp/2018/07/12/in-about-20-years-half-the-population-will-live-in-eight-states/?utm_term=.c24c1ad51732).
Growing up in Rhode Island, I had a sense of this type of issue by studying Little Rhody’s history. When the Constitution was being drafted, people in smaller states felt that the larger ones (New York, Virginia and Massachusetts) would dominate things.So, the idea of an upper chamber, the U.S. Senate, was put forward. The two smallest states, Rhode Island and Delaware, might not have many members of the House but each would get two Senators just as the big states would. Delaware seemed to like the compromise and became the first state to ratify the Constitution. Stubborn Rhode Islanders held out but finally gave in and became state #13.
When I first read the article, I wondered if the author was going to call for an end to the electoral college. Many progressives are still smarting over George W. Bush losing the popular vote in 2000 by gaining the White House. There is an even larger discussion of the issue with Donald J Trump’s electoral college victory in 2016. Yet, no, the author does not go there. He does, say, however, with some merit, that the House and Senate may well represent two different Americas.
Right now, the divide between urban and rural in America, to me, is largely cultural. It seems if these population shifts come to fruition (they do seem likely), things will get even more polarized than they are now. By the way, this is not true only in America. On May 22, 2012, I put up an MR post entitled “Urbanization, Globalization and Media” that discussed how DAILY across the globe some 180,000 were leaving rural areas to move to a city. Soon we will be facing issues that aging nations in Europe deal with daily. Hospitals in some Scandinavian countries are being closed due to declining populations. Countries with a deeply entrenched provider state are trying to see how they can maintain services in areas will declining economic prospects and aging populations. We are seeing cracks now in places such as Northern Maine, Western Kansas and Nebraska. Local schools have become regional and rescue squads are manned by folks in their seventies.
I thought about these data and forecasts and ran them by my hero—a no-nonsense, feet on the ground type who shares with me a tendency to look ahead. She immediately grasped the details and said “One caveat. Climate change.” If things do heat up, people will move back to certain places. Minnesota and Wisconsin will grow and Buffalo, Syracuse and Rochester will have a comeback. These places have lakes and upscale people like to live near the water. If the winters moderate somewhat, some will relocate to formerly forbiddingly cold areas that have good medical care and universities. Far fetched? Maybe. Yet, I have learned to take her forecasts seriously.
So the Post raised some interesting political questions. Will the Senate be dominated in two decades by people, who, if a mirror image of their small state constituencies, be out of touch with the population as a whole? I hope to live to see the outcome!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, July 25, 2018
Friday, July 13, 2018
Streaming Scenarios
The business news is full of reports about deals going on in the media business. Will Comcast be able to best Disney’s latest offer to Fox’s film and broadcast assets? If Disney gets it will Comcast be satisfied to enlarge their global footprint by purchasing Sky in the United Kingdom? Will Comcast leverage up and try and purchase both Fox and Sky? If shut out of the Fox assets will Comcast make a run at Discovery as a consolation prize and, at the same time, enhance their global reach as Discovery has some fine overseas assets? I admit that I watch the financial soap opera daily and find it amusing. To me, however, it is not the really big issue out there although it is a part of it.
The real issue, to me, is the coming war for consumers in the streaming video space. As you know, Netflix, Amazon Prime, and Disney are active in this space. Two other tech giants, Apple and Facebook have talked about entering the fray. And, of course, there is Alphabet (Google), an absolute behemoth which has owned YouTube since 2006 but has yet to fully monetize its possibilities as an video and advertising platform.
Sumner Redstone, decades ago as CEO of CBS, popularized the term “Content is King.” The statement has proven to be true as distribution is now taking a backseat to content and the streaming bidding wars are beginning in earnest.
I have generally hesitated to make definitive forecasts but in this case I make an exception. We, in and of the media world, are going to see fireworks in mergers, acquisitions and new services in the next few years that will dwarf anything that we have experienced to date. Why? From my viewpoint, it is very simple. The companies involved are the greatest companies (by many yardsticks) in measured economic history. They have the deepest pockets of any publicly held companies since (adjusted for inflation) John D. Rockefeller’s Standard Oil was broken up by the federal government early in the 20th century.
Consider the players:
1) Apple—this company has nearly 200 billion dollars in cash. They are generating an additional several billion a month in free cash flow. Now, they want to get in to streaming content. They can lose several billion a year for a while and can play the long game. A year ago, I, along with other media observers, thought that Apple would be wise to purchase Netflix. Perhaps they are sorry that they did not. Since the beginning of 2018, Netflix shares have increased by 115% so the acquisition now would be far more costly and more risky.
2) Alphabet—for nearly 12 years, they have done little with their amazing YouTube platform. If they decide to go all in with streaming by creating content, they will be a formidable competitor very quickly.
3) Amazon—Jeff Bezos has a lot of irons in the fire but his 100 million plus Amazon Prime members gives Amazon a nice start in streaming. And, if you watch it, you will see that Amazon Prime video original content is getting better. Bezos is patient. Remember that Amazon was not consistently profitable for many years. As was true of Apple, Amazon can play the long game in streaming content if they choose to do so.
4) Facebook—The social media titan is losing a bit of luster with millennials but they have a huge global base and deep pockets to boot.
5) Disney—the “Mouse House” has a great deal of their own content and may indeed snare the Fox Studio and film library from Comcast’s clutches. They are planning their own streaming service and have great franchises such as Lucas Films (Star Wars), Marvel Entertainment and classic children’s fare. Perhaps they can shoehorn ESPN in to the package as well. Disney is a leader in global entertainment and has made few missteps over the years. If they price their streaming service well and package it up properly, they will be a force for sure.
6) Netflix—let me begin by saying that I love the service. I use it several times a week for their Netflix originals and, given my affection for classic films, I also re-watch a number of my favorites. One issue that I have with Netflix is that they are not spinning off much cash. Yes, they have tremendous loyalty and have become one of the world’s most valuable brands. But, they are spending a fortune on content. I have seen estimates of $8 billion dollars for calendar 2018 alone. When asked about it, talking heads on CNBC and Bloomberg have rationalized it by saying that they can easily issue more shares if they need more money. Okay, that is fine when a bull market is in progress but this one is getting long in the tooth. When will they get profitable and start delivering a boatload of free cash flow? Right now, their logarithm seems to have found a sweet spot for consumer likes and their original programming has surprised many of us with success after success. And, their global footprint is expanding much faster than the traditional media companies. Still, I think they are vulnerable and a sale last year to Apple might have been their ticket to immortality.
So, where does all this leave us? In the 40 plus years that I have been analyzing media properties, I have found that it has generally been a bad move to bet against Disney. Yet they do not have the borrowing power of an Apple, Alphabet, Amazon, or Facebook or the recent success of Netflix. Were this a simple fight with Netflix pitted against Disney, I would bet that once Disney made a complete commitment to streaming they would eventually win a very hard fought victory. But with all the FAANG’s involved, it is a whole new ballgame.
One good thing. As competition heats up, it will be great to be a consumer. We will get some really nice pricing on streaming venues over the next few years.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
The real issue, to me, is the coming war for consumers in the streaming video space. As you know, Netflix, Amazon Prime, and Disney are active in this space. Two other tech giants, Apple and Facebook have talked about entering the fray. And, of course, there is Alphabet (Google), an absolute behemoth which has owned YouTube since 2006 but has yet to fully monetize its possibilities as an video and advertising platform.
Sumner Redstone, decades ago as CEO of CBS, popularized the term “Content is King.” The statement has proven to be true as distribution is now taking a backseat to content and the streaming bidding wars are beginning in earnest.
I have generally hesitated to make definitive forecasts but in this case I make an exception. We, in and of the media world, are going to see fireworks in mergers, acquisitions and new services in the next few years that will dwarf anything that we have experienced to date. Why? From my viewpoint, it is very simple. The companies involved are the greatest companies (by many yardsticks) in measured economic history. They have the deepest pockets of any publicly held companies since (adjusted for inflation) John D. Rockefeller’s Standard Oil was broken up by the federal government early in the 20th century.
Consider the players:
1) Apple—this company has nearly 200 billion dollars in cash. They are generating an additional several billion a month in free cash flow. Now, they want to get in to streaming content. They can lose several billion a year for a while and can play the long game. A year ago, I, along with other media observers, thought that Apple would be wise to purchase Netflix. Perhaps they are sorry that they did not. Since the beginning of 2018, Netflix shares have increased by 115% so the acquisition now would be far more costly and more risky.
2) Alphabet—for nearly 12 years, they have done little with their amazing YouTube platform. If they decide to go all in with streaming by creating content, they will be a formidable competitor very quickly.
3) Amazon—Jeff Bezos has a lot of irons in the fire but his 100 million plus Amazon Prime members gives Amazon a nice start in streaming. And, if you watch it, you will see that Amazon Prime video original content is getting better. Bezos is patient. Remember that Amazon was not consistently profitable for many years. As was true of Apple, Amazon can play the long game in streaming content if they choose to do so.
4) Facebook—The social media titan is losing a bit of luster with millennials but they have a huge global base and deep pockets to boot.
5) Disney—the “Mouse House” has a great deal of their own content and may indeed snare the Fox Studio and film library from Comcast’s clutches. They are planning their own streaming service and have great franchises such as Lucas Films (Star Wars), Marvel Entertainment and classic children’s fare. Perhaps they can shoehorn ESPN in to the package as well. Disney is a leader in global entertainment and has made few missteps over the years. If they price their streaming service well and package it up properly, they will be a force for sure.
6) Netflix—let me begin by saying that I love the service. I use it several times a week for their Netflix originals and, given my affection for classic films, I also re-watch a number of my favorites. One issue that I have with Netflix is that they are not spinning off much cash. Yes, they have tremendous loyalty and have become one of the world’s most valuable brands. But, they are spending a fortune on content. I have seen estimates of $8 billion dollars for calendar 2018 alone. When asked about it, talking heads on CNBC and Bloomberg have rationalized it by saying that they can easily issue more shares if they need more money. Okay, that is fine when a bull market is in progress but this one is getting long in the tooth. When will they get profitable and start delivering a boatload of free cash flow? Right now, their logarithm seems to have found a sweet spot for consumer likes and their original programming has surprised many of us with success after success. And, their global footprint is expanding much faster than the traditional media companies. Still, I think they are vulnerable and a sale last year to Apple might have been their ticket to immortality.
So, where does all this leave us? In the 40 plus years that I have been analyzing media properties, I have found that it has generally been a bad move to bet against Disney. Yet they do not have the borrowing power of an Apple, Alphabet, Amazon, or Facebook or the recent success of Netflix. Were this a simple fight with Netflix pitted against Disney, I would bet that once Disney made a complete commitment to streaming they would eventually win a very hard fought victory. But with all the FAANG’s involved, it is a whole new ballgame.
One good thing. As competition heats up, it will be great to be a consumer. We will get some really nice pricing on streaming venues over the next few years.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, July 4, 2018
Is Legacy Media Really Tuscany in Disquise?
On September 8, 2001, I was reading the New York Times. Columnist Anthony Lewis wrote a wonderfully descriptive piece on his love of Italy’s Tuscany and Umbria regions. It reads in part—“The silvery olive groves, the fields of sunflowers, the vineyards, the stone houses and barns……….Italy is evidence that there is more to life—a civilized life—than the unregulated competition of the market. There are values of humanity, culture, beauty, community that may require deviations from the cold logic of market theory.” He went on to lament the growth of corporate farms and waxed poetic over the small agricultural units he saw in the those two beautiful Italian provinces. I got his point—there is more to life than turning a buck and sometimes we need a reminder about what is important and quality of life should generally outweigh scheming for income.
I remember actually clipping the article out (no convenient online folders for me then) and vowing to visit Italy soon. Three days later, the 9/11 tragedy struck and the article and its message was submerged by glaring headlines. Some years later, I found the hard copy of the article as I was preparing to move. A few years later, my wife and I and other family members visited both Tuscany and Umbria and loved them. Also, friends put us on to the beautiful walled city of Lucca where we spent some wonderful days. A return visit is definitely on our bucket list. One thing that I notice as a demographer was how old the areas were getting. Young people have gravitated to the bigger cities for job opportunities and those remaining tend to be quite old in many instances. So, the memorable lifestyle afforded in many of the villages that we visited was threatened as the low Italian birthrate was well below zero population growth (children needed to maintain a level population).
I bring this story up not to defend the free market system although I am normally happy to do it. Rather, as conventional media is dying in the U.S. and other Western nations, a part of our lifestyle is fading as well. I am especially referring to metropolitan newspapers and selected magazines. Today, some 40+% of Americans get their news from Facebook. Call me old fashioned but I like the New York Times, Wall Street Journal, and The Washington Post which require two or more sources on their fact-finding. Investigative journalism is still important in a free society but as legacy media withers it is largely disappearing unless the story is huge. I also like to ponder a TIME magazine essay now and then even though the news in the publication (now sadly very thin) is not a few hours old.
The immediacy that the internet and contemporary news sources provide has its place and will only get stronger. I, for one, still savor, however, the nuance and distance that the printed reports in some old line media still provide.
To all of my American readers who make up nearly 45% of the Media Realism audience, may I wish you a happy Independence Day!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
I remember actually clipping the article out (no convenient online folders for me then) and vowing to visit Italy soon. Three days later, the 9/11 tragedy struck and the article and its message was submerged by glaring headlines. Some years later, I found the hard copy of the article as I was preparing to move. A few years later, my wife and I and other family members visited both Tuscany and Umbria and loved them. Also, friends put us on to the beautiful walled city of Lucca where we spent some wonderful days. A return visit is definitely on our bucket list. One thing that I notice as a demographer was how old the areas were getting. Young people have gravitated to the bigger cities for job opportunities and those remaining tend to be quite old in many instances. So, the memorable lifestyle afforded in many of the villages that we visited was threatened as the low Italian birthrate was well below zero population growth (children needed to maintain a level population).
I bring this story up not to defend the free market system although I am normally happy to do it. Rather, as conventional media is dying in the U.S. and other Western nations, a part of our lifestyle is fading as well. I am especially referring to metropolitan newspapers and selected magazines. Today, some 40+% of Americans get their news from Facebook. Call me old fashioned but I like the New York Times, Wall Street Journal, and The Washington Post which require two or more sources on their fact-finding. Investigative journalism is still important in a free society but as legacy media withers it is largely disappearing unless the story is huge. I also like to ponder a TIME magazine essay now and then even though the news in the publication (now sadly very thin) is not a few hours old.
The immediacy that the internet and contemporary news sources provide has its place and will only get stronger. I, for one, still savor, however, the nuance and distance that the printed reports in some old line media still provide.
To all of my American readers who make up nearly 45% of the Media Realism audience, may I wish you a happy Independence Day!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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