Conundrums of Media Stocks (Part 2)
The media sector is an engaging mix of companies which date back to earlier centuries and new ones in their infancies. The quality of business plans and the track records of underwriters (Heim, 2002) will determine whether one should set aside monies for initial public offerings by new media companies. However, more searching analyses are called for in the cases of established players in this field, whose stocks are traded daily on major Exchanges.
Integration and efficiencies are the prime considerations on the bases of which existing media operations can be evaluated for investment purposes. Some established conglomerates in the field allow their constituents to compete against each other, especially with respect to production and distribution phases of business (Alexander, 2004),. This was workable in the days of limited competition, but today’s markets demand vertical and horizontal integration. The best mainstream media stocks of the future will be ones which work across the spectrum of traditional and electronic media, and which combine production and distribution holistically.
Media stocks can continue to perform well in financial terms if they take cognizance of key trends in audience needs, perceptions, and preferences (Bennett, 2007). This can be rather difficult for hard-nosed financial experts to gauge, but it matters nonetheless. Authenticity is certainly an issue as far as the Internet is concerned, so new start ups which rely exclusively on the World Wide Web must take effective steps to establish credibility. Established players must also work to strengthen their stamps of authority by separating their projected opinions from the imperative of factual reporting (Bennett, 2007). Audiences have become more discerning, so while the best media stocks will continue to provide handsome returns and impressive growth, the dinosaurs and some upstarts without substance will be weeded out!