Post of the Day
February 9, 1999
Kua`aina Partners Folder
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Subject: The telecom playing field
There is a lot of talk going on about a merger between CNN and CBS. It's the feature in this month's Brill's Content. I haven't read the article, but saw it on the cover. It's also a headline at Raging Bull.
We also know that YHOO has signed deals with Rupert Murdoch's News Corp. If their "little" deal with Geocities a year ago is any indication of the way YHOO and Tim Koogle dates companies before going into business together, then I think we'll see fireworks here in 3-9 months.
And then there's the talk about LCOS and GE (NBC) putting together a deal.
If this happens, the playing field would look like this:
T - (Part owner of DirecTV) - owns TCI (which in turn owns the TV Guide Brand) TWX (and subsidiary Turner Broadcasting (TBS, TCM, CNN, Headline News)
Kleiner, Perkins, Caufield, and Byers in backcourt
|"The question is whether or not the content can afford to be separated from the distribution medium."|
MSFT - Tentatively
News Corp. - owns ASkyB (American Sky Broadcasting) and BSkyB (British Sky Broadcasting) and is the bitter enemy of Cable Companies
Fox - broadcast and online stable of channels
WCOM - a partner with News Corp. in ASkyB, American Sky Broadcasting Softbank in the backcourt
Players that Haven't made a move yet (and their connections thus far):
AOL/NSCP/SUNW - AOL has been unable to reach deals w/ cable in the past GMH Hughes Electronics (Owners of DSS Technology) - already has a deal with AT&T, and now that it owns Primestar, can claim links with News Corp. as well - Primestar was set to take over ASkyB, but the DOJ cancelled it FON (Sprint) EGRP - in its efforts to become a portal, it will have to choose a side, or possibly risk losing altogether. It has already been involved in behind the scenes with News Corp. to be the sole sponsor of Fox Market Wire. Through Softbank,it has connections with YHOO AMZN - I'll be surprised if AMZN doesn't announce its probable intentions to move into content by becoming part of a team
Prime Takeover Candidates:
MSPG - Mindspring, 2nd largest ISP, rumored to be in talks with YHOO Echostar Communications (DISH) - a partnership deal already exploded between DISH and Rupert Murdoch, and it's all the way to lawsuits now TMPW (Monster.Com) Any baby on-line investment houses (AMTD, SIEB, etc.) SBC, US West, PacTel, BellSouth, Bell Atlantic (who has the technology (ADSL) to move high bandwidth over existing copper lines MyFamily.com, and other sites like this that bring TV into Livingroom Replay Networks, TiVo (Real Time Personalized TV) who are now dealing with the likes of Sony, Panasonic, Philips, and DirecTV ZD NET- Ziff Davis, with a closet full of computer related websites and TV channels; a Softbank holding SATH - Shop at Home TMCS - Ticketmaster on-line
Conclusions and Predictions(contingent on a CNN/CBS & NBC/LCOS deals):
The question is whether or not the content can afford to be separated from the distribution medium. I would say that the two would grow parallel, but Team #1 would have the unique situation of having enormous content PLUS TWX/ATHM's proprietary distribution channels. Would this make the other teams sign up their own proprietary distribution channels? Maybe, but I definitely see Rupert Murdoch trying to buy GMH ASAP if Team #1 takes the field. He hates Cable, and would love to get the first shot at offering the alternative.
I don't think we'll see any further consolidation between teams, although a Team 5 may spring up overnight. There are 4 very different cultures at work there (heck, there's 100), and I don't see a lot of common ground between #4 and #1 for instance.
|"If this playing field turns out to be true, there will be three kinds of acquisitions - content, distribution channels, and eyeballs."|
That said, the merger that makes the most sense is #3 and #4 - This would be the best backing squad - Softbank and CMGi would all making these ponies go, with help from News Corp. and GE. All they might need is a distribution medium. And a compromise on culture.
Whoever GMH signs up with gets an immediate boost to the front of the pack, since that gives them first generation satellite technology immediately. GMH could do very well by the way, signing on with everybody.
If this playing field turns out to be true, there will be three kinds of acquisitions - content, distribution channels, and eyeballs. Buying MyFamily.com is an example of the first, GMH the second, and MSPG the third. TMPW is first and third, and therefore makes it my numero uno takeover candidate.
EGRP will gravitate to group #4, touching off a series of deals between wall street players and the other three teams
CMGi will start a 4th venture capital arm as it revels in the world it helped shape.
Look how deep Softbank and CMGi go into this new world. Talk about leverage, and we're not even talking internet anymore. We're talking a whole new medium, and they're right there.
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