Old Media's Lame-Duck Days

Remember merger mania? Remember the bigger getting bigger yet? Remember when the prices of media stocks weren't stalled? Me neither.

DreamWorks and NBC Universal go deep into talks. Microsoft (MSFT ) and Time Warner (TWX ) play footsie over a possible MSN/AOL link-up. In both cases, news of the talks leaks. The gasbags start gasbagging. The headlines get teed up. And...nothing happens.

Welcome to the new modesty. The moment of non-mergers. This is appropriate because the media landscape is slowly repopulating with non-moguls. (Was that Michael D. Eisner walking the halls at an investor conference last month before watching his successor Robert A. Iger from the audience? Yes.)

The modesty is appropriate because something existential is happening. The traditional players face big questions: How far do old-media skills get you with new-media consumers? Put another way: Does business sense translate across generations? These have implications for everyone from News Corp's (NWS ). Rupert Murdoch to Yahoo! Inc.'s (YHOO ) Terry S. Semel, the old-media guy riding the new-media rocket.

LATE 2005 MAY BE REMEMBERED as the interregnum between the era dominated by the old media giants and the one in which Yahoo! and its ilk began running things. (This is the Big Media analogue to the Ford and Carter Administrations.) But it's hard to advance when events keep one rooted in the past, and to a remarkable degree many big old-media guys still live with the aftertaste of deals from a faraway, much happier time.

This is not just about Time Warner's love-hate-love mood swings with AOL or Viacom Inc. (VIA ) splitting itself in two. Tribune Co. (TRB ) -- one of the least mogul-y big media conglomerates -- now has a tax liability of $1 billion, give or take, from its 2000 acquisition of Times Mirror. That deal, for $8 billion, magically magnified Tribune's presence among major-market newspapers by netting it the Los Angeles Times and Newsday. It turns out, in 2005, those are exactly the kind of newspapers you don't want to own because new-media competitive pressures are most intense in big cities. (That deal also brought Tribune the Spanish-language daily Hoy, which, along with Newsday, got the company in serious trouble last year by misrepresenting its circulation to advertisers.) Tribune's stock price just before the Times Mirror deal: $34.92. Today's price at the close of the third quarter: $33.61.

O.K. So if some big old-media deals look bad, are big new-media deals good? Especially if, let's say, they're for assets teeming with traffic from the young consumers who allegedly shun old media? Well, ask News Corp. and New York Times Co (NYT ). how well their stocks didn't do after they bought myspace.com parent Intermix Media Inc. (MIX ) and about.com. News Corp. has spent $1.3 billion on young-skewing online buys within two months, and Murdoch has been relentless in discussing the need to grab younger consumers. But so far the Street is skeptical.

If acquiring bits and pieces isn't budging the stock price, what will? It's extremely difficult for an old-media player to build a serious new-media asset. There are established competitors. There are generational issues. (Myspace would not have become myspace had it been launched by News Corp.) And there are the quarterly numbers that Wall Street demands -- when it's not whacking the moguls for being too dependent on mature businesses.

To move the needle right now, you need something massive. You need, for instance, to buy Yahoo. Of course, today it's too late to buy Yahoo. Today, Yahoo buys you. Assuming, that is, that Yahoo thinks its business sense can cross the generational divide. Or that it's even worth the bother.

By Jon Fine

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