Media, Entertainment & Gaming industry review Q2-2008; RSM EquiCo Capital Markets

Content is Still King

Content vs. distribution, the long-standing debate in the world of media, may have finally anointed a clear winner: content. Years before the advent of cable television, the Internet, satellite radio and the numerous other distribution channels in the market today, companies that controlled distribution were regarded as the “gatekeepers.” Content providers battled over airtime and the gatekeepers chose the victors. As each new distribution channel was introduced, the number of consumer viewing options multiplied, reducing the power of the gatekeepers.

Rather than simply provide access to content, media companies discovered a need to aggregate quality content in order to attract the consumer. Comcast's $51 billion acquisition of AT&T in 2002 provided Chief Executive Brian Roberts with nearly 60 percent of all cable/satellite television subscribers, leading market mavens to speculate the return of the gatekeepers to power. This speculation resulted in a spate of acquisitions as News Corp., Time Warner and other media giants fought to keep pace. But as HBO, ESPN, USA Networks and other powerful cable networks have shown, the experts miscalculated the power of the consumer. With the growing reach of the Internet—through streaming media sites such as Hulu and YouTube, social networking sites including Facebook and MySpace, news aggregators like Digg, and the ubiquitous blogging community—the options available to the consumer have never been greater. Read complete report.