Convergence: An investment perspective |
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| Authors: | Leo Kivijarv PhD |
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| Institution: | (1) Veronis Suhler Stevenson, LLC, 350 Park Avenue, 10022 New York, NY |
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| Abstract: | Conclusion Convergence is a very exciting model and one that holds, unforeseen opportunities. However in the current economic environment,
the investment community is hesitant to recommend that communications companies devote many resources in that area. The convergence
mode must prove that it can generate revenue and profits. Yet, it is limited to an advertising-supported model—a part of the
communications industry that has struggled during the past, year due to the recession. The increased advertising revenue that
would be generated by the convergence model is tainted—most likely taking advertising share away from the traditional media
segments that are supporting the model. Tied to the convergence model is a high dependency on the Internet. Internet advertising
is not local. In addition, financial data clearly illustrates that the Internet has caused profit margins to decrease substantially,
something that the traditional media company supporting the convergence model can not allow to happen. Finally, FCC deregulation
with regards to television station cap restrictions, cable system operators owning broadcasters in the same market, and cross
ownership of newspapers and television stations in the same market, will most likely have a negative impact on the convergence
model.
If a communications company should decide to go forward with convergence, there are five rules that should be followed:
| 1. |
Use personnel and technology efficiently
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| 2. |
Extend brand awareness of pre-existing communications products
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| 3. |
Offer cross-media advertising packages
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| 4. |
Return users to traditional media outlets
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| 5. |
BE PROFITABLE QUICKLY!39.
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The essay is based on a presentation made by Dr. Kivijarv at convergece: The Tour, a four-day conference sponsored by The American Press Institute. The purpose of the conference is to analyze the various
issues that communications companies should consider before attempting to build multimedia news operations that consolidate
newspaper, television, wired cable, and/or Internet divisions in a specific market. Dr. Kivijarv's presentation occurred on
the final day of the conference and spoke to the investment community's financial concerns. Veronis Suhler Stevenson publishes,
two of the leading annual reports on the communications industry—the Communications Industry Forecast and the Communications Industry Report. A majority of the data used in the presentation and this essay come from those reports and Dr. Kivijarv, as the Director
of Research & Publications at Veronis Suhler Stevenson, serves as the editor of the two reports. |
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