Craig is a quiet genius

I had the pleasure of interviewing Craig Newmark, the founder of Craigslist when he was in Austin as the keynote speaker of SXSW back in 2005 I believe. He was just as the article title Why Craigslists is Such a Mess describes. He is truly a quiet genius in my opinion. I believe his laid back attitude has probably gotten him where he is today. And when he says he doesn't really care about money, just looking at him makes you realize that. On the day we interviewed him he was very casual, met in a coffee shop where he spends most of his days answering e-mails, and looks at customer service as the most important aspect of his company.

I found an interesting YouTube video, http://www.youtube.com/watch?v=iwlJrKK3G58 with Newmark discussing Gov. 2.0 something I had not heard much about.

As for the other articles I don't really know what to make of advertising on the web. It's confusing, everyone seems to want the majic formula of what can make money (similiar to what television came up with years ago based on ratings), but nothing seems to click. At least it gives writers something to talk about.

My conservative portfolio

My portfolio includes:

Apple / Share price = $171.00
Disney / Share price = $27.00
Netflix / Share price = $47.00
Viacom / Share price = $27.00

Still hard to pick

Y=Yonghwan
X=My best friend working for a stock company in Korea

(Summarized & translated MSN messages)

Y: I am considering to buy some stocks which are media-related companies. Give me suggestions!
X: There's a sort of the order to take considerations such as law and regulation, trends... %$*^$^% (can not remember)
Y: I have no idea about law and regulations.
X: This is your own money? Why don't you invest that money to me....
Y: That's not real, it's for my class, which.........
X: Sorry, I am busy now... stock market right now....
Y: Ok, man, see you later.

I’ll take 3 companies:

1. NHN, which is the first-ranked search engine in Korea.

Here is what this company about:

http://en.wikipedia.org/wiki/NHN

http://www.naver.com/

Noticeable feature: Knowledge Search

Reason I picked: Irrational, Word of mouth: route from people who working for this company that I have known (e.g., invest on Research and new products), Perceived value of the company.

Supporting data (in growth):

http://finance.yahoo.com/echarts?s=035420.KS#chart1:symbol=035420.ks;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined

2. NYT

To see if how they goes in media market.

3. Google Inc. (GOOG)

Reason I picked: most frequently appeared in news coverage: for example, about releasing new products, which may positively affect their stock value.

Here’s some links:

http://bits.blogs.nytimes.com/2009/09/16/google-buys-service-that-uses-humans-to-digitize-books/?ref=technology

http://seekingalpha.com/article/161999-google-eyes-10-market-share-for-chrome-mac-version-on-the-way?source=yahoo

It is on the way of growing:

http://markets.on.nytimes.com/research/stocks/tools/analysis_tools.asp?symbol=GOOG

Questions:

- How to split my budget: e.g., show us how to calculate.

- Is Acer, which is one of companies I am interested in (as the fourth company), media company? (Noticing increasing market size especially in Netbook, LCD monitor, etc.

About Acer:

http://en.wikipedia.org/wiki/Acer_Inc.

Kang-Media Stock choice

My choice:

1. Daum Communication Corporation (South Korea)

Profile
Profile
Summary
Research
Analyst recommendation
Analyst recommendation

2. Google

3. The Washington Post Company

Sung Woo, Stock choice

1. IAC/InterActiveCorp(IACI):
Profile
Trend & Statistic
News
New Product
Price

2. News Corporation(NWS)
Profile
Trend
News: ownership
News: Paid content

3. Direct TV(DTV)
Trend
Profile
Key Statistics


4. Apple(AAPL)
Trend
Profile

5. New York Times(NYT)
Trend
Profile

Snap!

A = Avery

B = Good buddy who is the VP at an investment firm in Dallas

(Actual text messages)

A: So, I have $10,000 to invest.

B: WTF? Finally get that book published?

A: what book?

B: Exactly. SNAP!

A: nice. So I need to invest it all in media stocks

(33 minute pause)

B: This is your own money? Man, I can't suggest that you do that. Call me.

And with that, I present an introduction to the stocks I picked on Sunday night.

Thinking all-in on Google would be the easy way out, and that all in on media tech stocks might border on cheating (albeit, it would probably be the optimal route), I dove into a blend of the two. I'll go over my rationale (or lack of rationale) Thursday. So far, my portfolio is up more than six percent on the week ... but the market is, too.

My picks:

Yahoo

Cable Vision Networks

Washington Post Company

Research In Motion

Akami Technologies

Don't try this at home

If you ever hear that I'm going to Las Vegas, the best advice is to not give me money to gamble for you. Despite knowing the basic strategy of playing blackjack (my favorite Vegas table game) I tend to be the cooler at the table. I sit down and I lose money.

So when it came to picking stocks for this project I went about it the way I do with my money, conservatively. I selected Apple, Viacom, Netflix, and Disney. All have seen steady growth over the last two years and no one took a big dive when the economy took a dive last year. Each company has something to offer in the new media world and each one continues to develope new products to meet the demands of a changing market. My conservative approach also meant picking companies that are well known and have staying power. More to come tomorrow in class....

One-Hour Online Tutorial

Understanding Financial Statements by James Gentry:
http://www.businessjournalism.org/pages/biz/online_tutorials/

How to not be "cyclical"

Reading Picard's chapters, I kinda agree with Kate and Sandra that I'm glad that I am not doing either financing or advertise-marketing for news media. I think there has been a traditional barrier between newsroom and financing-advertising departments within media. I really think they are a bad combination. I came close to being one of the mixture. The newspaper I worked for in Korea made me meet finance and advertising guys every morning, to find out what newsroom can do to help them on daily basis. I was relieved of the post after a few months, because their demand was mostly unacceptable and all I did was to say uh-uh and no-no.

According to Picard, shares in media companies are categorized as cyclical in stock market, not recession resistent (178). What I have learned in the brief experience is that we are so dependent on advertise revenues and how much vulnerable that makes us. As the business got worse, dependence on advertisement got even steeper. What was surprising is that only a few decades ago, the portion of advertisement in the total revenue was around 50%, now over 80, closing to 90%.

The new business model that media companies are seeking for, whether they intended or not, seems to be heading toward the departure from this dependence. Paid online content, micropayment ideas or hybrid model of WSJ, they all seem to me as media returning to subscription revenues. Should I say, the Penny press revisited?

Some questions are raised, can the ratio of advertisement against the total revenue considered as an indicator of financial health? Or is it just the indicator of a healthy journalism.

Uh...I'm glad we're not really buying stock

If you believe in horoscope, then my topic will make sense if I tell you I'm Taurus. Dealing with risky affairs really drives me crazy. Fortunately, we' re not really going to buy. But I still came out of some directions.

1. Content Management System/ Database managing for News Organization
I know at school students still learn how to make websites using Dreamweaver. However, I don't believe any news organization is still using HTML webpage. Most of them are using CMS, a system just like the blog we're using, but more sophisticated. A lot of newspaper websites now look really similar, or even the same. I guess that's because they're using the same CMS? I'm really curious about how well this kind of service provider companies are doing.

2. Economic related media:Wallstreet Journal and Business Week
I guess everybody will try to cut the expense on newspaper during the recession, unless your work require you to read the paper. News media focusing on economic issues are those I can think of that their readers "have to" read. Also, it is said that the economic is recovering. I wonder after this crisis, does the demand of economic information rise or fall?

Google to share ad revenue from new reader with newpapers

This is interesting. Google has developed a new, "fast" reader meant to more closely approximate the experience of reading a print edition, and says it will give "a majority" of the ad revenue to the participating media outlets.

Are potential online subscribers already paying?

A new study says that 70 percent of loyal online readers subscribe to the print edition. If true, what does this mean for newspapers hoping to derive revenue from a paid content system?

How do you choose stocks?

Picard’s arguments on media financing and the capital market represent the importance of financial management in terms of its ability to influence media performance, especially considering the financial and economic health of media firms. The stages of financial management (Ch. 8) inform us about how companies perform most effectively. Such stages are important for not only companies but also for individuals who intend ultimately to maximize their wealth. However, would individuals choose media products based solely on profit maximization? This is an interesting angle. It pays attention to individuals’ distinct personality, age, and background as factors that influence their investment decisions. Thus, not only individuals’ desire to maximize profit, but also their psychological and sociological dimensions could influence the financial and economic health of the market. Therefore, if we need to consider the behavior of individual players in the market, would the stages change? What else should we consider for each stage, including cash flows?

In chapter 9, Picard argues the new media shares in view of the stock markets. As he mentioned, while the new media has the potential for significant growth and future profitability, its low financial performance hinders further large investments. In a sense, to what extent does the future “potential” and current “uncertainty” of the new media influence the stages of financial management? Would it be different from the stages for traditional media?

As mentioned in chapter 12, media firms can be evaluated differently, regardless of their health, as seen in terms of market share; however, the defining financial and economic health of media firms could differ depending on market circumstances. In such a complicated and competitive media environment, how we have strong indicators for evaluating media firms’ health. Also, in such competitive media circumstances, which factors or indicators would be more important for market leader and market followers, respectively, for their financial and economic health?

What media companies should I buy?

According to chapter 9. "Capital markets and media firms," the role of stock makets in media companies' financial issues seems to be increasingly important. The other piece suggests indicators of financial health: sales revenue growth or decline; change in results; debt growth or decline; change in asset value; reinvestment; productivity; capacity utilization; employee turnover; personal skills and knowledge; and resource dependence.

These indicators suggested seem important factors affecting the value of stock of the media companies. But I am wondering if I, "as a soon-to-be consumer buying stocks of media companies for this class," have data about this information, which may affect my personal revenue. If yes, where and how I can get this data and how should I weight among these indicators?
Furthermore, is there any other important considerations when I am about to buy stocks of media companies? (I have no idea at present :D )

Thank goodness it's not my job

Reading these three articles reminds me of what my general manager at my television station has to worry about day in and day out. At one meeting not long ago he tried to explain to us journalists why it's good for the station to have debt and it's not always a bad thing. Needless to say it was confusing and most of us brushed it off knowing that it wasn't our job to worry about the financial aspect of the company, we just had to worry about doing what the company asked us to do in order to make them money.

I think chapter 12 (p. 243) points out a very good idea when it comes to improving a company, investing in it. We are in a time when media is changing and journalists need additional tools to be able to provide the “new media” aspects to the audience. Recently the company I work for has invested in numerous items including laptops, flips cameras, better cell phones for still pictures, and hard drives to make our jobs “easier”. I put “easier” in quotation marks because what it has done is actually add onto our work load while making our jobs “easier” to provide that extra content now required of us to the audience. In the end though it has made a big improvement on what we are able to post to our website and has allowed us to increase our frequency of getting fresh content on there.

A perfect example of a company that choose not to invest is the local CBS affiliate KEYE. They were recently purchased by an investment firm which has no stake in the news business, rather just in profits. Many people have been let go and changes have occurred in the name of making money and not for the sake of journalism. It will be interesting over time to see where that takes them.

Needs of case study

How a firm survives and even thrives with its initial limited resources always confused me, but after reading Picard's chapters, I have more idea of what's going on in the business world and reconfirm that I'm definitely not a business person by birth but need to study harder. What comes into my mind after realizing the detail of money flow, credit management, etc. is how we study media economics and, further, media management and how we learn from the complexity of media business. Due to the various managements of media firms, probably we need to have a comprehensive case study of certain media firm to realize the reasons why it succeed or failed and where the problems come from. (Is that what business school does?)

For example, like the suggestions or strategies in the article "Our plan to fix the New York Times", the author tries to adopt the Wall Street Journal's partial business model to the NYT and treats it as the panacea. It's necessary to learn from the successful firm but probably they need the comprehensive case study or analysis of why the Wall Street Journal succeed instead of just focusing on the simplified cutting cost and raising subscription fees. It's so easily for us to focus on certain or most obvious outcomes such contents and the adoption of new technology of the whole business without knowing the money flow, the inner management, or the financial structure, etc. So, I think using a comprehensive case study to analyze the media firms could provide us a broader view or stimulate our imagination when coming up the alternatives to help the media industry.

Decision making for media market

What is the needs of firms? For an effective and skillful financial management, there are so many important decision-making points to seek capital at different stages (the research stage, the development stage, the introduction stage, and the establishment stage) and to solve problems of financing a new firm or product. It is more complicated than just earn money from the markets. It might be good if we have different case studies to understand different media financial flow, especially when the online environment is so different leading to different types of media product. The article I read in Wired, “The Good Enough Revolution,” points out that the markets have transformed by products that trade power or fidelity for low price, flexibility, and convenience. Therefore, in the digital environment, it could be possible that customers would sacrifice lots of quality for cheap and convenient device.

In this article, it is interesting to find out that sometimes promising idea might turn out to be fatally flawed in this digital era. The company (Pure digital company) was trying to combine digital imaging with the mass market of throw-away point-and shoots (disposal camera I think). However, it needs people returning the $20 camera to stores for printing photos and a CD. From getting those single use digital cameras back, the company can reduce the costs it had to manufacture. However, surprisingly, the customers didn’t return the cameras fast enough because they can print pictures later, print pictures by their own device, or just own the digital file, the company is hard to finance continuing operations (would it similar to the concept of credit management?). Therefore, the product and retailing failed. Does it mean that different media might need different model due to the uniqueness of market ecosystem.

NBC isn't really NBC, see?

After reading through Ch. 8-9 of Picard (and putting together my, ehm, investment portfolio) I started to consider what Picard suggests. In order for large media companies, corporations, etc. to exist, they must often have large contingents backing them. So, then, who owns who?

I really wanted to incorporate Wired into my portfolio, so I dug around and found out the publication was under the Conde Nast umbrella. No problem, right? Wrong. Conde Nast is privately owned. No room for outsiders there.

Okay, okay. MSNBC recently snagged a ton of Webbys. It's also been noted as one of the few network-originated platforms to have branched out with successful rapidity. An easy choice for the portfolio, right? Wrong again. General Electric has held as much as 80 percent of the company since 1986.

So who really owns who? Where does the capital come from? Where does it go? And where do we, as individual investors, get to jump in? As Picard writes, we take a major back seat in the investment pool.

While we're back here, check out this mapping of the media industry. It's like TLC, minus the 'sexy.'

Picard readings, the business of media

Picard, Chapter 8
I know that account executives (sales people) are a vital part of local television, where I spent most of my career, but I had no idea that collection was such a vital part of the media economy. I mean, it makes sense – if your clients don’t pay you have a huge problem, but is it commonplace to have difficulty collecting from advertisers?
And this is a bit sacrilegious, but having working in both television news and television production, I know the people in production were much more conscious of budgets – what they could spend on which equipment each year, how many light bulbs and videotapes they could get, etc. But news people were either clueless about budgets or kind of arrogant about them. If they wanted satellite time or more equipment they just expected it. I’ve always had the utmost respect for the division between business and journalism, but these days I think a lesson in the stages of development of a media company, and the complexities of budget management, should be mandatory reading for journalists. Kate and Peter, am I wrong?

Picard, Chapter 9
Along those same lines, there are certain institutions in society that serve a higher calling than just that of shareholders, like defense contractors, transportation and media companies. Is it ethical for Boeing to have the same shareholder obligations as, say, Mead paper?
On the other hand, I’m stunned at how much venture capital got tied up in tech companies in the late 1990s (40%; p. 175). I remember a commercial for a financial services company in which the antagonist was trying to talk his buddy into investing in a startup. When his friend asked about the company’s fundamentals, the antagonist says “Uh… it’s got a Web site!” Scary but true.
Public ownership gets scary when a firm like the New York Times Company borrows $250 million to make a loan payment on its new $600 million headquarters… which was built in the midst of a 20-year decline in readership. From an investor’s perspective, it makes owning a piece of Facebook (about 1,000 employees, 200 million members) more attractive than owning a piece of the Times (9,300 employees, 18 million readers, 830,000 print).
Finally, I think it’s disingenuous for media managers to cite the recession as the reason for their historic declines (p. 178). While everybody lost more capital since last September, the media failings preceded the Lehman Brothers failure; media companies fell harder; and they’re less likely to climb back out of the hole. It’s all about changes in demand (Chapter 12, p. 231).

Picard, Chapter 12
Picard dismisses the primacy of price in demand in media companies – that makes sense. It’s a scary world when there’s a declining demand for your product even when it’s free. As I mentioned before, debt is a huge factor for media companies (p. 234). My friend worked for XM Satellite Radio when it started up. They had insanely large infrastructure costs – two satellites built and launched; tens of thousands of pre-built and distributed satellite radios; enough staff to man 100 radio stations 24 hours a day. They were in over $1 billion before they were on the air and, so, were destined to fail. That’s a lot of fixed assets to depreciate. Their timing was also bad – XM launched in 2001, just two weeks after September 11 – and right when MP3 players (iPods) were launching. Sirius has the same problem, now, because there’s no possible change in reinvestment and productivity (p. 236-7).
The personnel issue reappeared on p. 242. How does a saturation of available journalism talent dilute the value of journalists? I’m sure we’re seeing an increase in journalism graduate school and former newspaper reporters keep popping up in other roles, like crowd-funded news outlets (spot.us, for example). How do we maintain “eat your peas journalism” in an era when its value is declining? Maybe that’s a good area to invest in R&D (p. 243).

Financial health of newspapers

Based on the Picard reading, what are some indicators of the financial health of newspapers?

• Reinvestment. Picard states that the "largest portions of reinvestment come in the form of capital expenditures," including investing in assets such as buildings. The New York Times completed their Manhattan skyscraper in 2007, but now finds itself in a position where it is borrowing on the building to keep the company afloat. So, while the new building may have been an important step in helping the company continue to grow, it is now enabling them to accumulate more debt, the risk of which has been debated in numerous places.
• Employee turnover. When considering the all-to-common layoffs and buyouts that have swept across the newspaper industry, it's worth considering whether these cost-cutting techniques are hindering rather than helping the overall health of newspapers. While Picard speaks of actual turnover, i.e. actual replacement of personnel rather than elimination, the points he makes about the impact of turnover, including less experienced employees reducing production and psychological disruption that are symptomatic of layoffs as well.
• Personnel Skills and Knowledge. While many newspapers are doing a good job in retraining employees to keep up with evolving technologies, the demands of print are disruptive. At the end of the day, as long as the print edition still needs to get out the door, social media and online deadlines will be considered secondary to those demands. in other words, in order to fully devote energy to new technology, the old needs to go.