By Philip van Doorn, MarketWatch
Getty Images, Reuters, Bloomberg
The entire media, content-creation, and distribution and telecommunications complex in the U.S. is in play because of slowing growth among some of the biggest companies.
And Tuesday’s regulatory approval of AT&T’s /zigman2/quotes/203165245/composite T -0.47% $85 billion agreement to acquire Time Warner sets the stage for what will likely be a round of consolidation.
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AT&T was suffering because of its mature wireless and landline phone and data services businesses. Its 2015 acquisition of DirecTV helped it expand and diversify its pay-TV services, while shoring up free cash flow to support its high dividend yield (5.82% as of the close on June 12). The Time Warner acquisition will transform the company into a major player in premium content and distribution through HBO, Warner Brothers and Turner, which includes CNN.
The data tell the story
Here’s a list of TV distributors, content creators, video-game developers and telecommunications-services companies in the S&P 500 Index /zigman2/quotes/210599714/realtime SPX -1.11% , sorted by how much their sales per share have changed over the past 12 months from the year-earlier 12-month period:
| Company | Sales per share - past 12 months | Sales per share - year-earlier 12-month period | Change in sales per share | Total return - 2018 through June 11 | Total return - 3 years | Total return - 5 years |
| Discovery Inc. /zigman2/quotes/202145150/delayed CA:DISC | $14.64 | $10.96 | 34% | 7% | -26% | -36% |
| Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN | $390.07 | $293.29 | 33% | 45% | 295% | 525% |
| Netflix Inc. /zigman2/quotes/202353025/composite NFLX | $28.46 | $21.58 | 32% | 90% | 285% | 1,127% |
| Alphabet Inc. /zigman2/quotes/205453964/composite GOOG /zigman2/quotes/202490156/composite GOOGL | $168.04 | $134.64 | 25% | 9% | 110% | 163% |
| CBS Corp. Class B | $35.42 | $29.01 | 22% | -11% | -7% | 21% |
| Charter Communications Inc. Class A /zigman2/quotes/201656355/composite CHTR | $161.47 | $141.36 | 14% | -13% | 53% | 136% |
| Comcast Corp. Class A /zigman2/quotes/209472081/composite CMCSA | $18.27 | $16.92 | 8% | -18% | 17% | 78% |
| Walt Disney Co. /zigman2/quotes/203410047/composite DIS | $36.99 | $34.36 | 8% | -3% | -1% | 77% |
| Electronic Arts Inc. /zigman2/quotes/206954087/composite EA | $16.62 | $15.58 | 7% | 33% | 123% | 549% |
| Time Warner Inc. | $39.85 | $37.71 | 6% | 6% | 18% | 96% |
| Activision Blizzard Inc. | $9.50 | $9.10 | 4% | 21% | 205% | 457% |
| Twenty-First Century Fox Inc. /zigman2/quotes/209921865/composite FOX /zigman2/quotes/207816609/composite FOXA | $15.74 | $15.23 | 3% | 18% | 29% | 56% |
| Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ | $31.27 | $30.25 | 3% | -6% | 19% | 23% |
| Viacom Inc. Class B | $32.05 | $32.41 | -1% | -8% | -54% | -51% |
| AT&T Inc. /zigman2/quotes/203165245/composite T | $25.76 | $26.28 | -2% | -9% | 16% | 25% |
| Dish Network Corp. Class A /zigman2/quotes/207505872/composite DISH | $27.85 | $30.22 | -8% | -32% | -55% | -14% |
| Take-Two Interactive Software Inc. /zigman2/quotes/204008930/composite TTWO | $15.49 | $17.59 | -12% | 4% | 306% | 646% |
| CenturyLink Inc. | $26.53 | $31.94 | -17% | 14% | -27% | -24% |
| Source: FactSet | ||||||
We included the video-game companies because this form of entertainment is growing rapidly and competes with traditional TV/video content. We included google holding company Alphabet /zigman2/quotes/205453964/composite GOOG -7.44% /zigman2/quotes/202490156/composite GOOGL -7.68% because YouTube offers pay video services. And we included Amazon.com /zigman2/quotes/210331248/composite AMZN -2.02% because the company’s Prime service features video content, including original programs and movies produced by Amazon.
We used sales per share, rather than raw sales, because the per-share numbers incorporate any dilution caused by the issuance of new shares to fund acquisitions or for any other reason. The per-share numbers are also boosted when buybacks reduce share counts. We looked at 12 months of data to smooth out the numbers.
You can see that the sales growth numbers for the two major telecom companies aren’t particularly impressive. Verizon’s /zigman2/quotes/204980236/composite VZ -0.07% sales per share were up 3%, while AT&T’s were down 2%. The major telecoms’ stock performance has greatly lagged that of Amazon, Netflix /zigman2/quotes/202353025/composite NFLX +1.07% and Alphabet, all of which are now dynamic content creators and distributors.
What’s ahead
Tuesday’s court decision likely clears the way for other transformative mergers to be completed:
• Disney’s $52 billion deal to acquire content creation and distribution assets from Twenty-First Century Fox /zigman2/quotes/209921865/composite FOX +4.43% /zigman2/quotes/207816609/composite FOXA +4.38% (not including Fox News). That is, unless the deal is trumped by a superior all-cash offer for Fox assets from Comcast /zigman2/quotes/209472081/composite CMCSA -2.29% . Then again, Disney may decide to increase its bid to keep the Fox deal on track.
• T-Mobile agreed in April to merge with Sprint.
Meanwhile, CBS and Viacom are dancing around as the two companies consider merging, after CBS spun off Viacom in 2005.
Looking again at the chart, it’s also fair to wonder if years of rumors will lead to an offer for Dish Network, which has suffered a significant decline in sales per share over the past 12 months, along with poor long-term stock performance.
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