Stations Offer Big Value To Skinny Bundles

The proliferation of so-called skinny bundles — online offerings of popular TV channels like Dish’s Sling TV and Sony’s PlayStation Vue — may undermine cable TV, but not broadcast TV, said two Wall Street analysts on a panel at the TVB Forward conference in New York on Thursday.

That’s because TV stations are just as important to the skinny bundles as they are to cable and satellite operators, said Michael Nathanson of Moffett/Nathanson. “You need a broadcast stick to start off.”

Marci Ryvicker of Wells Fargo agreed. “The skinny bundles are going to need stations and they are going to need the network programming.

“We see that with Apple TV, even Dish,” she said. For Sling TV to hit “its target numbers over time [it] needs to have a broadcast tier. That’s really important and I don’t think investors understand that.”

Asked about the two recent broadcast mergers — Media General’s $2.4 billion purchase of Meredith and Gray Television’s $442.5 million purchase of Schurz Communications’ radio and TV assets, Ryvicker said that the latter was better received by investors because Gray has “a playbook and they went right by the playbook.

“It’s immediately accretive,” she said. “We saw the numbers, put a multiple on it and, you’re like, wow, this stock should be up 20 bucks, and it shot up.”

Some reacted negatively to the Media General deal in part because it wasn’t so easily understood. They question why the company, having spun off its newspapers, would go back into publishing with Meredith.

Investors are feeling better about the deal since Media General CEO Vince Sadusky yesterday explained more of the thinking behind it. “That really, really helped sentiment,” Ryvicker said.

The Wall Streeters were all aware of the incentive auction, which the FCC hopes to conduct early next year, and how it could affect the valuation of station groups. But Ryvicker and Todd Juenger, an analyst at Sanford C. Bernstein, cautioned against trading on it.

Investors need “some degree of certainty” about when the auction will happen and what the outcome might be, Juenger said. The fact is there is little certainty around the auction, he said. There may not be an auction next year, he said. And if there isn’t an auction next year, “it may never happen or it may happen in 2020 or 2022.”

“Do not put a value into your target price,” added Ryvicker. “You will be wrong.”

As the session wrapped up, moderator Lawrence Haverty of Gabelli Multimedia Trust, asked the three panelists whether they were a bull or a bear on media and asked them to pick a stock winner or two.

Juenger declared himself a bear. Noting that he covers only the Big Media companies like Disney and CBS, he said, “all these trends make those businesses a lot less valuable.”

But he said, he likes two companies — 21^st Century Fox because of international opportunities and Nielsen because “they have information.”

Nathanson said he was less bearish than he has been, seeing many media stocks as undervalued. If he had to pick a single stock, it would be Google “because I don’t see any real competition.… Google is pretty damn interesting.”

Ryvicker said she was bearish on Big Media “because they are selling to the wrong people,” but bullish on distribution.

Of all the sectors she covers, she said, “broadcast TV is the healthiest and my two top picks would be Gray [Television] and Dish.”

Read all of TVNewsCheck’s TVB Forward coverage here.