Are Media Mergers Good For The Market? CMCSA, FOXA, DIS, Etc.

Wednesday, May 23, 2018

Currently, we are seeing the first of several lightened trading volume episodes in the market for calendar 2018: Memorial Day Weekend. The exodus to temporarily relaxing climes begins arounds now-ish, and we expect lower volumes to be with us as Q1 earnings season is mostly in the rearview mirror. We’re not even seeing much through the geopolitical lens, with a U.S./China “trade war” on “hold,” the Eurozone slowly gaining more traction, and nothing really acute anywhere around the world, headline-wise, pulling focus.

We’re seeing an implied open for our major indexes down this morning, nevertheless. Even with oil prices solidifying in the profitable $70-plus range, the Dow pre-market is down roughly 150 points, the Nasdaq -60 points and the S&P 500 -15. Perhaps, as Zacks Exec VP Kevin Matras has stated this morning, that the downturn in sentiment which began yesterday has to do with the lack of progress regarding peace negotiations with North Korea (although read the article to see why he rejects this premise). Or, perhaps as our early week drifted shares higher without much outside force pushing or pulling it, we’re drifting lower for the very same reason.

We do see Comcast (NASDAQ:CMCSA) preparing an all-cash offer for 21st Century Fox (NASDAQ:FOXA) assets, reportedly at a premium to Disney’s (NYSE:DIS) offer previously. However, we’re not being fed a dollar amount for this offer, only that preparation is at “advanced stages.” This is the sort of thing that grabs headlines around Memorial Day. We may see a counter-offer from Disney or we may not, depending, but in either case we see Fox stock up but Disney and Comcast shares down in today’s early session.

One thing that springs to mind about either Comcast or Disney growing content exponentially with Fox’s assets is that media companies are all attempting to reach behemoth levels. We’ve already seen other burgeoning mergers such as that between AT&T (NYSE:T) and Time Warner (NYSE:TWX) . But is aggressive amassing of mass media outlets really a good thing for consumers — or the market?

Venture capitalist Roger McNamee last month discussed just this phenomenon: that tech and media are growing too big to be essentially profitable. Much the way the government stepped in three-and-a-half decades ago to split up Ma Bell’s “monopoly” in the telecommunications market, McNamee suggests the same should be done for giant tech monoliths like Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL) . (McNamee, by the way, was an early investor in both stocks.) Only once these giant media conglomerates are forced to hive off into their own distinct companies will they once again unlock real market value.

Of course, with things like media mergers pushing things in the opposite direction, McNamee may have to wait a while for this to happen. That said, perhaps we’re simply in the early stages of large-scale morphing in tech and media industries — like cosmic nebulae of billions of dollars in investments — that may transpire over the next several years. This, too, is the sort of things some of us think about when Memorial Day trading volume puts market activity into a relative slumber.

Mark Vickery
Senior Editor

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