Everybody knows tv is being disrupted. In fact, my antenna doesnt even work properly but its not a major issue as we have several streaming services.
the bear case is built on this... but nine has arguably done more to adapt and seems to actually get it
1. Nine now (nines free streaming service) works well. In particular, during the recent aus open they simulcast all matches so you could actually watch what you want! It also benefits advertisers because you know who is actually watching your advertisements
2. strong local programming that netflix, disney, amazon and apple cant match (or be bothered matching). Strong reality shows (mafs still strong), sport (aus open highest rating in years) and local drama. Local shows (especially reality) particularly gives advertisers an ability to be involved in the program itself - eg: block with maccas, vw etc. (of note, i do worry about their winter sports without afl - rugby league provides nsw and qld eyeballs but pretty much nothing elsewhere)
3. Have a foot in the subscriber camp as well through ownership of stan. I have stan and netflix and actually watch as much stan as netflix. May suffer from Disney plus taking away disney/marvel contact but they still have a large library including good old shows
4. Fairfax. Content is king and of increased importance. Owns strong newspaper brands such as the age and smh and afr. Usually favoured by higher income earners (stereotype but not unfair over the tabloid alternatives). Also provides ability to cross-sell to advertisers, promote content on other services (eg: mafs recaps) and save costs.
5. Part ownership of other digital channels such as domain. Again providing an opportunity to cross-promote. (Try playing a drinking game during the block every time they mention domain).
Nine Entertaintment or News Corp?
It's a great matchup and one to be considering when looking at investing in either of these companies. Which is superior, who is commanding the market and who is negotiating better deals for content or advertising?
There's lots to compare with these two companies and both are surprisingly in relatively strong positions in the COVID environment. Advertising is down, but the ability to renegotiate sports rights could prove beneficial.
Both firms hold significant stakes in online real estate portals with NWS holding REA and NEC holding DHG (realestate.com.au vs domain). Real estate is definitely going to be a challenging space. Revenues are already being hit as REA recently announced that it would be accepting payment at sale date rather than upfront. On the flip side, if there is more distressed selling then there could be an increase in listing volumes and revenue. Either way, you've got to choose which brand you like more.
News Corp is certainly bigger in the print space than Nine and owns book publishing as well as magazines and news papers. Domestically this is a comparison of things like The Australia vs The AFR, or The Herald Sun vs The Age and so on. Tough businesses that need to adapt but I would argue the recent Fairfax acquisition by NEC is more dynamic and potentially profitable.
A big concern for NWS is whether it has become too associated with right wing politics that profits and credibility swing with sentiment and popularity.
Foxtel, Kayo and Binge VS Stan and Channel 9. Both developing products and figuring this new market out with international competition in the arena as well. Once again, which one do you prefer? I'd say that Stan has a more consolidated customer base and stronger growth. Foxtel is too expensive these days and Kayo has been hit by a lack of sports.
Valuing both companies can be done in a range of ways. UBS and Macquarie have both put a sum of parts valuation for NWS at the $22.50+ mark compared to ~$17.10 market price. Nine has a sum of parts at $1.60+ compared to a ~$1.40 market price. They both tend to trade below sum of parts values though, and there is a lot of uncertainty at the moment.
Nine Entertainment has a more diverse board and executive team and a strong suite of content which makes me think that they are more progressive and able to drive future growth. The addition of Fairfax will provide efficiencies and credibility to the company as well. Overall, I like News Corp and think it's got good growth but I like Nine Entertainment more and think it will deliver over the long term.