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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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Then Old Media Became Redunzl

Updated: May 4

“The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.”

May 1, 2024 | We hope you agree that Q1 2024 earnings season so far is just a bunch of laughs. Bank earnings are basically a wash for 2024 as lenders deal the impact of COVID and the Fed's low rate environment. US Treasury Secretary Janet Yellen has begun to buy back low coupon debt, a stunning admission that Fed Chairman Jerome Powell made a serious error dropping interest rates to zero in 2019. The inflation caused by Powell's actions has now tied the Fed's hands and left the market for Treasury debt with serious liquidity problems.

Given the confusion at the Fed and Treasury, fintech financials from Affirm Holdings (AFRM) to SoFi Technologies (SOFI) to Upstart (UPST) are getting a lot of pushback from investors. Yet the swings in these once high-flying stocks seen in 2023 were tiny compared with 2021.  The manic stock market moves of the COVID era are long gone, leaving us to pick through the wreckage caused to existing businesses and assets by emerging technology. And it's not about AI.

Source: Google Finance

Financials are not the worst of Q1 2024 earnings, however. Earnings season has featured the collapse of the investment thesis for several large legacy media properties, led by Paramount (PARA). Like the controlled implosion of an old casino in Las Vegas, watching Disney (DIS) and other traditional owners of content struggle with the new world of smart phone slavery is scary. 

PARA announced yesterday that CEO and industry sage Bob Bakish is stepping down as CEO of the media company. Bakish will be replaced by three executives in what the company calls the “Office of the CEO,” CNBC reports This just means that PARA is now headed by three really smart people who have not a clue what to do next with their old media business. Remember when PARA bought an NFL playoff game just to boost viewers? How many of those "customers" did PARA retain? Not us.

Our composer brother Michael Whalen predicted just this very consolidation of the old media world in a 2017 issue of The IRA (“The Economics of Content: Michael Whalen”). Now Michael writes in Medium about the next chapter of the end of the media world that we used to know. But like the good old days of Hollywood, the sponsors still drive the media bus. They are just getting bigger, leaving the incumbent players of TV and film completely Redunzl, to recall the late great composer Frank Zappa.

“Video streaming companies (who are also pretending to be TV networks — I am talking about YOU Paramount!) try to make decisions about what shows to produce and which ones not to produce. How is this possible when you literally do not know how much money you will have on hand this month, to say nothing of 18 months from now when a finished series or film is finally shown to the public? If you read the trades, you see a lot of desperate choices being made daily by executives who are still thinking about video content like a television network or a film studio. It is this thinking which is getting them into real trouble and will ultimately seal their fate. At Apple, they create video content as a loss leader to get consumers into their hardware/software ecosystem or to KEEP them there. Apple is very clear on why they are making shows and they can afford to lose billions of dollars in an effort to force their competition to fold or worse, merge. In 3 to 5 years, only the biggest tech companies (Apple, Google, Microsoft) will be in the streaming business because the others will have run out of cash to compete. Yes, it will be a bloodbath. Big milestone: when Disney decides to sell some or all of its streaming operations to keep the lights on at its theme parks. You heard it here first... #magickingdom

Yes, mere media is going back to being just advertising, including the sacred world of Hollywood and the movies. Notice that Michael does not place Netflix (NFLX) among the survivors in the growing media firestorm  In the brave new world of media, films and music are just chum for the great eyeball aggregators to use as bail to acquire new users. Not quite like those comfortable ads before a film in a theater years ago.

And what about those M&A transactions swirling around PARA? Michael: "It is a desperate ploy to manage the internal chaos from the last of the Viacom investors. The ship is sinking and before it goes down once and for all, Shari is trying to pretty things up. A “roll-up” isn’t really in the cards. Apple and Google will wait until it is a fire sale."

The closed media ecosystem that depended upon monopoly control of distribution is fragmenting into thousands of different pieces called “streaming.” But we could say the same for consumer finance.  Every time a new app gains access to a customer's bank account, that bank is probably going to lose a customer or at least an opportunity to create a new asset.  But the bigger question is how does any business gain the attention of consumers who spend hours a day randomly staring at a phone? 

In the early days of new media pre-2000, analysts used to speak of the lifetime value of a customer and the cost of acquisition. Today with the service providers losing any semblance of control over customers, building and managing a business that sells access to content is a crapshoot at best. Just as media properties like PARA or NFLX are losing value to the financial power of the great technology firms, the world of consumer finance is also undergoing vast change as well.

In our next issuer of The IRA, we'll be reviewing the latest earnings from the

worlds of banking, fintech and mortgage finance for our Premium Service.

The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.


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