Dare to Compare: How Do Media Firms Stack Up?

If audience reach, users, or subscribers all boil down to eyeballs and
pocketbooks, how come Gannett, which through its TV and newspaper units
reaches about 23 million, is an $18.5 billion market capitalization firm,
while Excite, with a reach of about 20 million via the Web, sits at $1.3
billion?

Of course, revenue and earnings are key factors to the difference, but
let’s consider the end game: garnering your time.

Whether it’s the silver screen, tube, dead trees and ink, coaxial cowboys
or the Web getting everyone’s attention, media is a continuum and the race
for your time looks like it’s starting to converge into the one thing
everyone wants more of: your eyeballs and pocketbook.

This means that the platform may become less of a point and the outlet that
can add the most value to get you to spend time becomes increasingly
important with advertisers, merchandisers, marketers and more saying look
here.

What are these “time-demanding” firms worth? On average our number
crunching reveals that the group of media companies here trade at 3.4x
latest fiscal year revenue.

Let’s see how these companies compare:

Granted, our analysis shows only a glimpse of the depth of operations at
the larger media firms. For example, Disney commands a global presence in
parks, cruise lines, resorts and has one of the world’s best libraries of
film and animation with a value that cannot be reflected in its stock price
in our book. The mediums it encompasses range from riding a rollercoaster
to watching a film. In broadcast it reaches 100 million households in the
U.S. through its ABC subsidiary. We estimate that represents about 240
million people. It’s still the same game, eyeballs and pocketbooks.

Comcast owns cellular, cable and high-speed Internet access units, some of
which trade in its common stock, while others trade in separate securities.

One of the more notable nuggets to come out of this scenario is AOL with a
(NYSE:AOL) market cap per subscriber of $1,297 and AOL.com Web site per
user value of $912 vs. AOL’s latest annual revenue (6/97). We estimate that
if AOL backed out its access revenue and showed only commerce/advertising,
then the revenue multiple starts to look awfully close to what many Web
media firms trade at, north of 50x.

Yahoo! (NASDAQ:YHOO) trades at more than 70x trailing year revenue while
Excite (NASDAQ:XCIT) is at 26x. Said another way, Yahoo!, Excite, Lycos
(NASDAQ:LCOS), Infoseek (NASDAQ:SEEK) and AOL (without access revenues) may
be in the same neighborhood in revenue multiples.

On the horizon we expect high-speed services to emerge and battle it out
for the hybrid TV, Web, print, radio arena. Already radio stations
broadcast on the Web, albeit at sound quality that would make Radio Shack
smile.

But what happens when CD-quality sound flies to your TV or PC via whatever
method and suddenly any radio station in the world (or home-based hero)
becomes a global broadcaster?

That’s part of the hidden value in something like RealNetworks
(NASDAQ:RNWK) which aggregates stations around its software platform. Real
can steer the entire world’s broadcast franchise through its doorway. RNWK
market cap was $589 million on June 4. One TV station in a major metro
market sells for more than that. An AM station in New York City could fetch
that.

The multiple services, such as Comcast now offering Internet access, doing
cable programming and cell services, Gannett in mixed media including the
popular usatoday.com, and Time Warner (NYSE:TWX) all over the map and more,
means that in a digital media environment values may become extremely
volatile. Focusing on users becomes that much more important.

“Eyeballs and pocketbooks, eyeballs and pocketbooks.” That’s the media
mantra Wall Street will be chanting for all these stocks as time blurs the
lines.