NBC and CBS VOD Deals Not Such A Big Deal

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I don’t share the view that some tipping point was reached and the TV network model was changed forever by the announcements that NBC and CBS would sell individual programs for 99 cents via DirecTV (DTV) and Comcast (CMCSA/K), respectively. I believe these deals just will just reinforce trends already in pace by accelerating DVR penetration. In fact, the DirecTV-NBC deal requires a DVR to work. If a household has a DVR, it can record any NBC program with the push of a single button. If you’ve never used a DVR, all you do is pull up the guide, move the cursor over the program you want to record and hit the record button. NBC wants you to pay an extra 99 cents so you can watch it commercial free. I record “Seinfeld” five times a day via my DirecTV Tivo and we buzz through the commercials with the fast forward button. A typical commercial block takes less than 20 seconds to fast forward past….

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Knight Ridder Sale Won’t Rescue Newspaper Stocks

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I don’t think Knight-Ridder (KRI) is likely to receive a takeover much more than 10% above the current price. Further, I don’t think the current situation surrounding KRI is likely to kick off a round of takeovers in the newspaper industry. Assuming KRI gets a bid, which is not guaranteed, it will provide support for newspaper equities around recent lows but it is also likely to confirm that recently depressed multiples are warranted. Without a sustained uptick in advertising growth, which I don’t expect, I believe the stocks will be a value trap even if KRI goes out a price above current trading levels….

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Echostar: I Prefer Other Multichannel TV Stocks

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Echostar (DISH) reported 3Q05 revenue and EBITDA right in line with expectations at $2.1 billion and $501 million, respectively. However, the EBITDA figure included a $35.1 million one-time benefit. Therefore, EBITDA appears to be short of expectations and is likely the reason the shares are trading down over 2% as the conference call wraps up. Another possible cause of the weakness is ARPU coming in at $57.78 vs. consensus estimates of about $58.60. Closely watched subscriber acquisition costs matched analyst estimates at $670. Churn was up in the quarter but apparently the company proactively called subscribers in Alabama and Mississippi t turn off their subscriptions as opposed to billing them knowing a write-off would come in 4Q. Excluding the hurricane impact, churn appears in line with expectations….

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Cablevision: Cheap But Too Many Distractions

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My initial reaction when I read through the Cablevision (CVC) earnings report was that the shares would trade off because EBITDA from the cable business was light of expectations by about $15 million or 4%. The Street seemed to agree as the shares fell by about 1%. However, on the call the company explained the shortfall and the shares have since recovered are now up on a down day in the market. I don’t think there was any major news in the press release or on the conference call and I continue to believe the shares are stuck in the mid $20s unless cable industry valuations in general rise. I think that is possible as double digit growth will continue for the foreseeable future. So far investors have been unwilling to pay for that growth because they fear a sharp slowdown when RBOCs start offering wireline video across large numbers of households. Nothing on the conference call will allay those fears but multiple compression can only go so far, in my opinion….

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Central European Media Enterprises: Good Third Quarter Sets Up Strong Finish to 2005

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Central European Media Enterprises (CETV) reported solid 3Q05 EPS last week in a seasonally weak quarter. The market liked the results and the stock is set up well heading into what should be a well-attended analyst meeting in Prague scheduled for Thursday and Friday (my best contact on CETV will be in attendance). I think CETV shares can head toward their all-time highs between now and year end as investors anticipate strong 4Q05 results and look ahead to double digit growth in revenues and operating cash flow in 2006…

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DirecTV: Not Interested In Getting Long

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DirecTV (DTV) reported slightly disappointing 3Q05 results primarily due to higher than expected churn and retention marketing. Revenue of $3.2 billion was a little shy of estimates while EBITDA of $365 million was a more significant shortfall. Gross and net adds don

Comcast: Disappointing Quarter Delays Potential Upside

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Elements of Comcast’s 3Q05 earnings report are disappointing and they are elements that will matter to the Street. While top line revenue growth and EBITDA growth closely tracked Street estimates, rising 10% and 14%, respectively, a loss of 37,000 basic subscribers in a seasonally strong quarter and higher than expected capital spending, and thus lower free cash flow, will be the key takeaways from the quarter. These facts caused Comcast to decline more than 5% yesterday….

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November Model Signals

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The November signals from the market cap and style models Northlake uses to allocate ETF-dedicated funds were unchanged from October. Consequently, no trades were done for November and client portfolios continue to own Mid Cap and Value. Specifically, clients own the S&P 400 Mid Cap (MDY) for market cap exposure, while style exposure is split 75%/25% between the Russell 1000 Value (IWD) and Russell 2000 Value (IWN)…

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AOL Doesn’t Come Through But A Solid Quarter for Time Warner

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Just a quick follow-up to my earlier post about AOL and Time Warner (TWX). AOL did not come though on the ad line as I thought might occur. I still believe we will see strength in 4Q when AOL.com really launches but for now the push-pull between subscriber loss and advertising growth is too large an obstacle to overcome. Interestingly, paid search grew nicely in the quarter which does suggest the GOOG numbers were something of a tip-off. However, branded advertising was sub par, maybe growing less than 10%, and this is where the AOL.com launch is supposed to help.

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Time Warner: Will AOL Finally Show Good Advertising Growth

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Given the critical role that AOL will play in the perception of TWX’s quarter I wanted to mention an interesting piece of research Bernstein put out last week about advertising revenue at the MSN division of Microsoft (MSFT).
I switched to a bullish position on TWX in September based primarily on my belief that the relaunch of AOL.com as an open portal was going to be well received by advertisers in its first few quarters. Given that AOL is the key swing factor in the value of TWX shares and multiple expansion for AOL is largely dependent on the Street’s view of organic advertising revenue growth, any uptick in AOL’s organic advertising growth is likely to be well rewarded by the Street. My impression from reading analyst research and checking with another non-Street contact is that advertisers are willing to give AOL.com an opportunity over the next couple of quarters. In fact, I’ve read that AOL largely sold out its advertising on AOL.com for the fourth quarter.

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