On any given day, some 2.2 trillion hours of television are being watched across the U.S. according to Nielsen.
So it boggles the mind when stock-picking gurus tout Web companies with questionable revenue streams. For example, Facebook has barely made it back to its IPO price. Meanwhile there have been big gains made on the boob tube.
It Pays to Advertise.
Almost all media live and die by advertising revenue. And advertisers have a very good reason to continue throwing their money at television stations; and that reason is their huge scope.
Television has the reach of nearly 89% of the total U.S. population. Radio offers only a scant 58.8% reach. Newspapers fall to a mere 36.1% of the nation. The only thing that comes close to matching television’s reach is the Internet and its reach is currently hitting 73.1% of the population.
All of this points to the obvious and that is that television controls the vast majority of ad spending including local television websites that continue to draw in new viewers and ad dollars are following these eyeballs.
The Bigger the TV, the Better.
Of course, audiences are not the only thing about television that is growing. Televisions have gotten huge. A decade ago, a 25-inch screen was a big deal; today you will find screens reaching 40, 50, 60, and even 80 inches.
And, the same concept is happening with television station companies as well, meaning bigger is better. These stations are expanding into markets around their home regions and nationwide.
There are some key reasons for this.
First, television dominates media attention and spending so the more stations you own, the better.
Second, expanding regionally helps lower costs. By having news reporters in each locality, you will need to have fewer reporters covering large-scale events. When it comes time to buy content for your television station, the more eyeballs you can reach, the better deals you can negotiate with distributers.
Third, there has been a major shift in the way television is broadcast and it is continuing to evolve setting up another major growth area for television broadcast companies. This involves the switch from analog to digital television broadcasting.
After the television stations switched from analog to digital broadcasting in 2009, broadcast TV companies discovered they were using less spectrum than allocated … so they rolled out more channels tailored to specific view niche groups. Remember, the riches are in the niches.
As smartphones and tablets demand more bandwidth, the broadcast companies are offering to sell or rent their excess spectrum as they realize they are sitting on an increasingly valuable additional asset.
So, Let’s Make a New Deal.
Armed with all of this good news, leaders in local television are scrambling to buy more local stations and other broadcast companies. So, it is beginning to look like it is time for roll-ups as there are a few small companies with market caps of a billion dollars or less and these are tempting new targets for speculative investors.
Watch companies similar to these: Tribune, Gannett, E.W. Scripps as well as Nexstar Broadcasting Group. These are leaders in this industry, the cream of the crop; and these are just food for thought.
I trust this post has provided some background and evidence that now is a good time to benefit from investing in the television and broadcast industry.
It is wise to monitor Television and the Broadcast industry as there are truly exciting developments underway. I will continue to monitor developments and provide updates in future articles and at my blog.
Also, I want to thank Neil George of Lifetime Income Report, published by Agora Financial, as he was the source of some of the materials about Television mentioned in this post.
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