Content is rapidly being devalued...
Yahoo! (YHOO) and Time Warner were downgraded by a Wall St. analyst yesterday. His reason for cutting Time Warner is that, once its cable systems have been spun-out to shareholders, its crown jewels which include Time Inc, AOL, and networks such as CNN were not worth the multiple at which the company trades. The essence of his argument is that content, even the best content, is losing its value.
Part of the problem with content value is tied directly to the recession. Accountants should take it easy when they lean on that too hard. The best assets bounce back when the economy recovers. But, by forcing companies to write-down their content assets so extremely they are saying that the firms can never go home again. Their TV shows, movies, magazines, and newspapers will never recover all of their value...
...No one knows to what extent content will be "re-valued" as the economy improves. The newspaper industry may not be able to get any of its value back. Magazines may face the same problem. To the surprise of many, some of the more valuable content, like expensive feature films, may only make a great deal of money in theaters. The yield from VOD on the internet sales and syndication on the Apple (AAPL) iPod may turn out to be extremely modest.
The largest media companies are making the case that the only reason their asset values have dropped is the economy. That case may not hold up.
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