New media versus old media
Media companies have not only been in the media recently, so to speak, but also have had varying share-market performances. Far more than in the prior decade.
As you can see below the difference between the best performers and worst is marked.
What should be apparent from this graph is the noticeable correlation between 'old' media and 'new' media and share-market performance. The top four performers are all new media companies that have (in one form or another) embraced the digital age. The bottom three performers, all much older companies, are related to free-to-air television.
To my mind this highlights and reiterates the importance of investing in areas and industries that are likely to see structural growth in the future, rather than likely decline. An average company in a good growing industry will beat a great company in an industry in decline over time, every time.
First Samuel has, as it relates to equity investing in media, developed a distinct preference over time for the radio industry (or new media, if the price was ever reasonable – it is not currently). Whilst radio has been around for a long time, it is also relatively immune to disruption. The form of delivery may change (digital versus analogue) but the content will not, so much.
In this regard it is useful to contrast radio to free-to-air TV.
We saw clearly in FY-15 the start of what is likely to be an ongoing trend of less hours spent watching TV (at least as we all know it – being free-to-air) but more people listening to radio (as the population gets bigger).
It is not therefore surprising that the worst media equity performers in the last year have come from this 'old media' area.
Whilst we do invest in businesses from time-to-time that look challenged (the balance sheets are strained or the economic cycle is hurting them, in the short-term) it has always been our goal to end up in areas where the industries are likely to see growth well into the future.