Watch out BskyB – here come the new media giants
The internet has posed a serious challenge to traditional media such as newspapers and even satellite broadcaster BSkyB, says Tom Bulford. But for small media companies, it's opened up a wealth of opportunities.
On the face of it, BSkyB looks a great business. Over ten million customers in the UK all happily shell out over £500 a year to BskyB. Even our big supermarkets cannot do much better than that.
But BSkyB is caught in the middle of a media revolution. The more we look to our PCs, tablets and smart phones to download and stream programmes, the more BskyB is suffering.
And BskyB isn't the only one suffering. The other day, my teenage son asked me why I bothered to buy a daily newspaper. "You can see the news online for free", he said. That is not exactly what a professional journalist wants to hear. But I know what he means.
His generationno longer waste away hours lazing on the couch. Just as they now can with music, they have the freedom to watch what they want when they want. They do not expect to have to watch TV programmes at a time when the station chooses to show them.
But all of that is great news for us penny investors. Because there are a clutch of small media companies that are rapidly adapting to this new era. And I'll point you in the direction of one today.
Where this new media revolution is headed
This is both a challenge and an opportunity and BSkyB is reacting with a number of new services. Sky Go gives access to movie, sports and entertainment channels through PCs, laptops, Xboxes, smartphones and tablets. Sky Anytime, as the name suggests, allows customers to call up programmes at any time. And as the result of a deal with Zeebox, viewers will be able to interact with TV shows, buying featured items or chatting to other viewers.
Also coming up this year from BskyB will be theirnew internet pay TV service. This will be delivered over the internet to any broadband-connected device and that of course, nowadays, could include the television.
BSkyB cannot afford to stand still. Newcomers like LoveFilm and NetFlix are offering movies online, delivered for just a few dollars. The distinction between your desktop PC and your television is becoming ever narrower. This is a challenge for PC and television manufacturers but it is great news for consumers.
But who else might benefit from the media revolution?
A global audience on your doorstep
Social networking has introduced the idea of interactivity again some content is better suited to this than others. One reason for the early success of music as a download is that it works in any format, but video is a little more demanding.
Content providers are fast adapting to this new world. Despite the gradual decline of traditional TV viewing, we are spending more time looking at a screen than ever. The rapid extension of broadband is creating an instant global audience. The cost of delivering content has never been lower. And, let's face it, the things that we enjoy do not change much from one season to the next.
A tiny film company ahead of the game
The film industry is busy, but it too is having to adapt. It is fighting a battle with cinema owners, reducing the period during the latter can exclusively show a new movie. DVD sales are in decline. But for the film makers, on-demand and online sales promise rapid access to a global audience with minimal costs of delivery.
Last week, the head of one unique penny share business expressed the view that 'the potential revenue benefits for independent film companies have been generally underestimated. Instead of having to pay expensive duplication, packaging and distribution costs on DVD, distributors can now simply license the rights to a 'video on demand' network. This can then stream the film into households.' I believe this cunning little company could soar in the next few years, and within the next 12 months could give you a potential return of 281%.
I go into a lot more detail about this company in my February issue of Red Hot Penny Shares.
This article is taken from Tom Bulford's free twice-weekly small-cap investment email The Penny Sleuth.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by Fleet Street Publications Ltd.