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June 14, 2018, 7:41 a.m. EDT

TV, telecom and media companies’ sluggish sales numbers create an urge to merge

The big, old players need to diversify as legacy sales lag

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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 +3.69%  $85 billion agreement to acquire Time Warner sets the stage for what will likely be a round of consolidation.

Click to Play

AT&T, Time Warner and the Entire Media Merger Frenzy Explained

From AT&T and Time Warner to the hot pursuit of 21st Century Fox and Sky, media mergers are in full swing. Why now? WSJ's Amol Sharma answers all your questions about the forces driving media deals. Photo: Getty Images

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 +1.42% , 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   /zigman2/quotes/201842100/composite DISCK   $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 +1.52%   /zigman2/quotes/202490156/composite GOOGL +1.36% because YouTube offers pay video services. And we included Amazon.com /zigman2/quotes/210331248/composite AMZN -0.18% 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 +1.93%  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 -0.21%  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 +2.14%   /zigman2/quotes/207816609/composite FOXA +2.58% (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 +4.93% .  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.

/zigman2/quotes/203165245/composite
US : U.S.: NYSE
$ 23.05
+0.82 +3.69%
Volume: 80.02M
Dec. 2, 2021 4:02p
P/E Ratio
189.71
Dividend Yield
9.02%
Market Cap
$158.74 billion
Rev. per Employee
$746,783
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/zigman2/quotes/210599714/realtime
US : S&P US
4,577.10
+64.06 +1.42%
Volume: 2.80B
Dec. 2, 2021 5:08p
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/zigman2/quotes/202145150/delayed
CA : Canada: Toronto
$ 36.69
+0.44 +1.21%
Volume: 2.00
Dec. 2, 2021 5:00p
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/zigman2/quotes/201842100/composite
US : U.S.: Nasdaq
$ 22.67
+0.87 +3.99%
Volume: 4.92M
Dec. 2, 2021 4:00p
P/E Ratio
12.17
Dividend Yield
N/A
Market Cap
$11.19 billion
Rev. per Employee
$1.09M
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,437.36
-6.36 -0.18%
Volume: 3.24M
Dec. 2, 2021 4:00p
P/E Ratio
67.21
Dividend Yield
N/A
Market Cap
$1746.47 billion
Rev. per Employee
$297,430
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 616.47
-1.30 -0.21%
Volume: 3.33M
Dec. 2, 2021 4:00p
P/E Ratio
55.56
Dividend Yield
N/A
Market Cap
$273.64 billion
Rev. per Employee
$2.66M
loading...
/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 2,875.53
+43.17 +1.52%
Volume: 1.06M
Dec. 2, 2021 4:00p
P/E Ratio
27.69
Dividend Yield
N/A
Market Cap
$1876.22 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 2,859.32
+38.29 +1.36%
Volume: 1.46M
Dec. 2, 2021 4:00p
P/E Ratio
27.54
Dividend Yield
N/A
Market Cap
$1876.22 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/201656355/composite
US : U.S.: Nasdaq
$ 670.40
+36.20 +5.71%
Volume: 1.43M
Dec. 2, 2021 4:00p
P/E Ratio
31.30
Dividend Yield
N/A
Market Cap
$113.71 billion
Rev. per Employee
$500,489
loading...
/zigman2/quotes/209472081/composite
US : U.S.: Nasdaq
$ 51.50
+2.42 +4.93%
Volume: 26.16M
Dec. 2, 2021 4:00p
P/E Ratio
16.58
Dividend Yield
1.94%
Market Cap
$224.24 billion
Rev. per Employee
$616,452
loading...
/zigman2/quotes/203410047/composite
US : U.S.: NYSE
$ 147.20
+5.05 +3.55%
Volume: 18.18M
Dec. 2, 2021 4:02p
P/E Ratio
134.98
Dividend Yield
0.00%
Market Cap
$258.38 billion
Rev. per Employee
$354,668
loading...
/zigman2/quotes/206954087/composite
US : U.S.: Nasdaq
$ 122.59
+2.36 +1.96%
Volume: 3.11M
Dec. 2, 2021 4:00p
P/E Ratio
45.15
Dividend Yield
0.55%
Market Cap
$34.00 billion
Rev. per Employee
$514,455
loading...
/zigman2/quotes/209921865/composite
US : U.S.: Nasdaq
$ 32.91
+0.69 +2.14%
Volume: 1.15M
Dec. 2, 2021 4:00p
P/E Ratio
11.07
Dividend Yield
1.46%
Market Cap
$19.06 billion
Rev. per Employee
$1.43M
loading...
/zigman2/quotes/207816609/composite
US : U.S.: Nasdaq
$ 35.33
+0.89 +2.58%
Volume: 5.52M
Dec. 2, 2021 4:00p
P/E Ratio
11.88
Dividend Yield
1.36%
Market Cap
$19.06 billion
Rev. per Employee
$1.43M
loading...
/zigman2/quotes/204980236/composite
US : U.S.: NYSE
$ 50.73
+0.96 +1.93%
Volume: 27.36M
Dec. 2, 2021 4:00p
P/E Ratio
9.54
Dividend Yield
5.05%
Market Cap
$206.06 billion
Rev. per Employee
$970,439
loading...
/zigman2/quotes/203165245/composite
US : U.S.: NYSE
$ 23.05
+0.82 +3.69%
Volume: 80.02M
Dec. 2, 2021 4:02p
P/E Ratio
189.71
Dividend Yield
9.02%
Market Cap
$158.74 billion
Rev. per Employee
$746,783
loading...
/zigman2/quotes/207505872/composite
US : U.S.: Nasdaq
$ 31.19
+0.64 +2.09%
Volume: 5.10M
Dec. 2, 2021 4:00p
P/E Ratio
7.49
Dividend Yield
N/A
Market Cap
$16.15 billion
Rev. per Employee
$1.15M
loading...
/zigman2/quotes/204008930/composite
US : U.S.: Nasdaq
$ 161.38
+1.03 +0.64%
Volume: 1.22M
Dec. 2, 2021 4:00p
P/E Ratio
33.35
Dividend Yield
N/A
Market Cap
$18.49 billion
Rev. per Employee
$519,287
loading...
/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 2,875.53
+43.17 +1.52%
Volume: 1.06M
Dec. 2, 2021 4:00p
P/E Ratio
27.69
Dividend Yield
N/A
Market Cap
$1876.22 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 2,859.32
+38.29 +1.36%
Volume: 1.46M
Dec. 2, 2021 4:00p
P/E Ratio
27.54
Dividend Yield
N/A
Market Cap
$1876.22 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,437.36
-6.36 -0.18%
Volume: 3.24M
Dec. 2, 2021 4:00p
P/E Ratio
67.21
Dividend Yield
N/A
Market Cap
$1746.47 billion
Rev. per Employee
$297,430
loading...
/zigman2/quotes/204980236/composite
US : U.S.: NYSE
$ 50.73
+0.96 +1.93%
Volume: 27.36M
Dec. 2, 2021 4:00p
P/E Ratio
9.54
Dividend Yield
5.05%
Market Cap
$206.06 billion
Rev. per Employee
$970,439
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 616.47
-1.30 -0.21%
Volume: 3.33M
Dec. 2, 2021 4:00p
P/E Ratio
55.56
Dividend Yield
N/A
Market Cap
$273.64 billion
Rev. per Employee
$2.66M
loading...
/zigman2/quotes/209921865/composite
US : U.S.: Nasdaq
$ 32.91
+0.69 +2.14%
Volume: 1.15M
Dec. 2, 2021 4:00p
P/E Ratio
11.07
Dividend Yield
1.46%
Market Cap
$19.06 billion
Rev. per Employee
$1.43M
loading...
/zigman2/quotes/207816609/composite
US : U.S.: Nasdaq
$ 35.33
+0.89 +2.58%
Volume: 5.52M
Dec. 2, 2021 4:00p
P/E Ratio
11.88
Dividend Yield
1.36%
Market Cap
$19.06 billion
Rev. per Employee
$1.43M
loading...
/zigman2/quotes/209472081/composite
US : U.S.: Nasdaq
$ 51.50
+2.42 +4.93%
Volume: 26.16M
Dec. 2, 2021 4:00p
P/E Ratio
16.58
Dividend Yield
1.94%
Market Cap
$224.24 billion
Rev. per Employee
$616,452
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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