The publishing industry, broadcasting and cable TV industry, entertainment industry, among which the publishing industry is more attractive than the latter two.
a. User fees: companies that rely on one-time user charges sometimes encounter the dilemma of unstable cash flow, because cash flow is greatly affected by the sales performance of many individual products, including released movies or newly published novels, etc.
b. Advance payment: Advance payment tends to be predictable, which makes forecasting and planning easier, thus reducing the company's risk. Another advantage of prepaid money is that users pay before they get services, which reduces the company's reliance on external sources of financing.
c. Advertising fee income: Companies based on advertising models may enjoy fairly good gross margins because gross margins are often amplified by high operating leverage. Media companies that rely on advertising revenue are quite sensitive to the country's macroeconomics.
Media companies have many competitive advantages such as economies of scale, monopoly, and unique intangible assets, which help them to generate sustained free cash flow. Economies of scale are particularly important in the publishing and broadcasting industries, and monopoly plays a more important role in the cable and newspaper industries. Unique intangible assets (such as licenses, trademarks, copyrights and brands) are important throughout the media industry. To select companies that have a high market share in their main markets, a monopoly is good for profit. Licenses (especially for the broadcast industry) can reduce competition and maintain high-profit margins.
Companies in the newspaper industry enjoy the monopoly advantage of their respective markets. This monopoly position has given these companies the ability to raise prices without fear of a large loss of customers. Companies in the publishing industry also benefit from economies of scale, which can lead to more gross margins through successful acquisitions.
Most of the money of broadcasters is earned from advertising. The more listeners, the more money the broadcaster attracts, which means that the increased advertising revenue can be directly used as a profit. The cable industry enjoys a luxury monopoly in many independent markets. It is highly capital-intensive, meaning that free cash flow is negligible. This is a big drawback.
Entertainment companies that rely on one-time user charges often have certain deficiencies, such as variable cash flow and low-profit margins. On the positive side, the database of such companies is protected by law from being damaged by replicas, and barriers to entry in these areas are relatively high, but in the past few years, the Internet has weakened barriers, especially in the audiovisual industry. The reason for the poor performance of the entertainment company's long-term performance is clear: most of the industry's profits have been given to big-name actors, directors and producers, leaving nothing to shareholders. In addition, this is a business that is essentially driven by the success of the show, and it is difficult to accurately predict and track the taste of the audience over the long term.
a. Free cash flow: free cash flow and income ratio of 8-10% or more, at least one of the following three things: the company has consumers who are willing to pay extra compensation for products or services, the company is efficient Or the company does not need to use more capital investment. If you see a media company with weak free cash flow, you have to confirm whether the company's core business has been performing well, and you have to be sure that the company's management choice is to use excess capital investment.
b. Sensible acquisitions, beware of companies that attempt to create synergies between two unrelated companies through large mergers, looking for acquisitions that are closely tied to the company's business and that are closely digested. Also, look for companies that do not have too much damage to their balance sheets.
a. Many media companies have also been controlled by the founder's family, which may lead to company decisions that are sometimes more favorable to the family than external shareholders.
b. Media companies are widely cross-shared, which means that when a media company makes a decision, another company has more say in your company than a separate shareholder.
c. Be wary of companies that give ridiculous gratuities and over-subsidies to senior management of the company.
The media industry has excellent operating conditions, can form a monopolistic competitive advantage and generate a large amount of cash flow. Look for companies that are just and frank management teams and have a history of successful acquisitions.