The Youtube generation

Those wacky IT consultants have come up with a new generation, gen C otherwise known as the "Youtube" generation". Gen C is not an age group but the mindset of constantly being connected to the internet. One of Gen 's major habits is connecting to Youtube for entertainment. 80% of Gen C watch Youtube on a smartphone.

This is a big shift in consumer behaviour, these shifts create new opportunities and the leader in this case is Youtube. Last week on their official blog Youtube announced that they have hit one billion monthly users. Thats a lot of people, nearly one out of every two people on the internet visit Youtube every month. If you dig in further some of the most searched items on Youtube are music videos Call me maybe and Gangnam style being the no1 and no2 songs and video that you could not get out of your head in 2012. 

Source: http://www.google.com/think/infographics/gen-c-connects-on-youtube.html


Flashback to 2006 at the time Google bought Youtube the acquisition was seen as controversial but now with one billion users later, it works out that Google paid $1.65 a user a low acquisition cost in hindsight. 

When you sell Youtube how do you celebrate, upload a video to Youtube! The founders of Youtube below seem just a little bit excited. In their words the two kings in search and video have teamed up to create a better service for users together. 

Source: Youtube of course


Google paid $1.65 billion in 2006 for Youtube this acquisition is now one of Google's top growth drivers. Amazingly 40% of advertising is still spent on TV this spend should shift to Youtube over time. As devices like phones and tablets become more and more internet connected Youtube should also benefit. Stay tuned to Google.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long GOOG

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Mariott time for a late stay?

With Easter coming up its time to think about a vacation and where you are staying is just as important as to where you are going. It can really make or break a holiday. A favorite hotel for many is Mariott (MAR). No matter where you travel around the world you know you will receive consistent world class service and importantly a proper nights sleep!

As a company MAR is quite different to what you might expect, they don't actually own their hotels. MAR makes the majority of their money from franchise and management fees. They typically team up with property developers and offload the property to investors while MAR manage and run the hotel. It is a capital light model which has allowed MAR to grow faster than they would have otherwise.

Source: MAR hotel in Kuala Lumpur Malaysia

The model works because of MAR's brand and distribution. MAR owns 14 different hotel brands ranging from the high end Ritz Carlton to the flagship Mariott Hotels to Fairfield Inn & Suites by Mariott. MAR is so successful with property developers because their rooms are always nearly full. 20% of bookings are made online through Hilton.com and 50% of room nights are made from MAR reward members. These rooms would be hard to sell without MAR's loyal audience and distribution. 

 Source: Mariott investor day

Booked out?

Supply growth from the industry has been muted since the crisis. One of MAR's main peers Hilton was taken private by Blackstone group near the top of the market in 2007, due to overleveraged competitors MAR has grown to around 9% room marketshare. MAR is dominant in North America but is set to become even more so with around 20% of hotels in construction.

Check in to Chinese tourism

MAR is pushing hard into China. MAR received an unexpected marketing boost when Xi Jinping the President of China traveled to the US and stayed exclusively at MAR hotels. MAR market share in China is growing with 15% of room supply but 23% of room revenue due to their premium brand. MAR also believe that they will benefit from Chinese tourists visiting the US, according to MAR the US has a supply of only 5 million rooms. They estimate over the course of the next decade there is the potential for an extra 40 million inbound visits from China, often staying for a week that is 280 million nights a major shock to the system!

The bad news is that the US government is 5% of overall MAR travel so the budget issues have and will impact MAR profitability. We think this focus is too short term with the Chinese opportunity MAR is one way to check in to growth in the Chinese travel industry.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in MAR

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Great business cards

Really enjoyed this site below with pictures of business cards from some of the most famous people in the world.

Had to wear sunglasses to read Bill Gates card, so bright!

 Kids these days!

Only Steve Martin could carry this card off

Source: http://www.flavorwire.com/364847/the-fascinating-business-cards-of-20-famous-people/view-all

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has a position in Facebook

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

The world's most famous arena?

The world’s most famous arena is the Garden in New York City. Madison Square Garden (MSG) no surprise is the owner. What is surprising about MSG is that they do not just own the venue. MSG owns the content, the New York teams Knicks and Rangers (basketball and hockey) and the distribution rights. Management likes to think of themselves as a content company not as a sports team. MSG owns two media networks that distribute the content, one focused on sports and Fuse which is focused on music and entertainment. These two networks generate nearly all of the operating profit for the company.

If you can make it here you can make it anywhere

Madison Square Garden has been estimated to have cost to build $1.1 bn in todays dollars and this number does not include the recent transformation underway which costs another $1 bn.  According to totalprosports.com it is one the most expensive stadiums in the world. The Garden is arguably a lot more valuable than its cost given MSG has ownership of the air rights an extremely valuable asset for a skyscraper given its central location.


Knicks worth one bilion dollar$

They also own the New York Knicks, the New York Rangers and the New York Liberty. According to Forbes the New York Knicks alone are worth $1.1 billion alone topping the National Basketball Association as the most valuable team.

 

Doing the math just for the Knicks and the venue equals about $3bn (not including the media networks) below the enterprise valuation of the entire business of $4.1 billion.
At the moment the Garden is undergoing a transformation, the final phase to be completed in 2013. The upside to all this is that the Garden has been shut for up to 5 months of the year in order to complete renovations. Also with the NBA’s new collective bargaining agreement running costs will decrease with players now receiving 50% of revenue down from 57% previously.

Sports here there and everywhere

The value of sports rights are increasing dramatically due to smartphones and the need for cable companies to differentiate their content. Having a smartphone in your pocket means subscribers have the ability to watch sport live no matter where you are. Personally taping games to watch later never seems to work, with all the media around today its too hard to escape the result.

Some of this value has been illustrated through recent purchases by cable companies, it is the main way that they can differentiate content from competitors. Late last year NewsCorp bought 49% of the New York Yankees baseball channel valuing the network at $3 billion. This follows Time Warner Cables deal for the Los Angeles Lakers paying $3 billion for 20 year of rights. These transactions showcase the inherent value in teams are the media rights. Buyers are not buying the team but the regional sports networks. The networks make the money the teams spend it (though both are needed)!

 Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in MSG

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Manchester United are you a fan?

Manchester United (MANU) is the most famous sporting team in the world. According to the IPO documents MANU has 659 million followers worldwide with over 108m fans in China. Amazingly during the 2010/2011 season MANU 60 games attracted an average live cumulative audience of 49 million per game, based on Futures Data.

Not just a team

MANU is not only a team but a prestige brand. The advertisers seem to think so with record breaking deals with Chevrolet. The Jersey sponsorship with Chevrolet will bring in $559 million over seven years beginning in the 2014-2015 season. MANU has also increased its exposure to Asia by opening a marketing office in Hong Kong. This has lead to sponsorships with China Construction Bank for MANU branded credit cards and Wahaha their official soft drinks partner in China.

Are you a fan?

MANU had a rocky start to listed life completing its IPO at $14 down from the proposed range of $16-$20 given investors concerns over governance. The voting structure put in place by the Glazer family means the rest of the shareholders are subordinate to the families interests. However recent sponsorship deals including the purchase of 100% ownership of their content network has lead to re-rating. George Soros is officially a fan, his hedge fund bought into the stock after the IPO reporting a 7.85% stake in the company in a regulatory filing.

 What are the risks?

There are plenty if the team doesn't perform the value will go down, luckily MANU has a pretty consistent track record.

Unfortunately the man who should get most of the credit for MANU's trackrecord Sir Alex Ferguson is now aged 71. Sir Alex is the key, he was appointed manager in 1986 and according to public comments Sir Alex is 'hoping to stay on for a bit of time.' 27 years have passed so it is a big risk to the investment given players not only want to play with MANU but under Sir Alex as well.

Another risk are billionaires with way too much money investing in premier soccer teams without regard to financial returns. This is a big risk given football teams tend not to have salary caps. Hopefully for investors new fair play rules requiring teams to fund operations from cash flow and operate on the basis of their own revenue rather than debt will help mitigate some of this behaviour.

The customer base is concentrated. MANU's main customers are the Premier League, UEFA, Nike and Aon representing 51.5% of revenues in 2011. Though going forward this reliance will decline as more Asian based sponsors are brought on board.

Goal!!!
MANU's main opportunity is tapping into their overseas fanbase leveraging the smartphone. MANU now own 100% of their media network. MANU will increasingly offer video on demand providing subscribers with limited access to match highlights and news. In the UK coverage of MANU and the premier league is everywhere, in international markets there is less coverage and competition. MANU believe they can directly develop exclusive content to international fans in their language and local context. I think I will stay tuned.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in MANU

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

I'll drink to that

It is still early but I think we might have already seen the deal of the year. No it’s not the ABI and Groupo Modelo takeover but a side deal between the two giants and Constellation brands (STZ) a wine company. The side deal involves STZ gaining ownership in the US of Corona. According to BrandZ below Corona is the 4th most valuable beer brand in the world. To appease concerns over market share concentration ABI has agreed to sell the US rights of the Corona brand to STZ. STZ will have the brand rights to Corona Extra, the best selling imported beer, Corona Light, the leading importing beer and Modelo Especial the third largest and one of the fastest growing major imported brands.
 

 

Concentrated beer

The US beer industry according to the DOJ complaint is highly concentrated with just two firms accounting for 65% of sales nationwide. With this deal STZ will become the 3rd largest beer company exposed to the fast growing Hispanic market in the US.

Source: DOJ, http://www.justice.gov/atr/cases/f292100/292100.pdf
 
A better balanced deal?

A Corona in both hands! The initial deal was not convincing and was blocked by regulators, this deal should ease their concerns. The initial deal involved STZ only having the right to import into the US for a 10 year period with ABI having an option to buy them out. STZ would not own the rights to the brand or production and would have been highly dependent on ABI. The DOJ believed that ABI's initial transaction to offload the remaining 50% of the Corona US import business was structured to "create a facade of competition" between ABI and STZ the importer.

The deal announced last night addressed all these concerns, now STZ will own the brands in the US and production facilities. STZ will become a stronger competitor over the longer term with perpetual ownership and ability to manufacture not just Coronas. STZ will be able to focus more on building volume and scale rather than just profit as a short term importer.

How do you know someone is planning for the future?

They buy two cases of Corona instead of one! The Piedras Negras brewery is key to the future of the deal. The brewery was completed in 2010 and utilizes state of the art technology which allows the brewery to be self-sufficient and able to be expanded in a modular fashion. The brewery is only 15km from the US border. According to STZ the brewery has capacity of around 120 million cases of beer which will cover 60% of STZ US import needs until they ramp up the plant further with ability to expand to approximately 360 million cases.

The beauty of the deal is that STZ has no restrictions on what beer they could produce at the facility, they can start producing their own craft beer. Importantly the deal helps to eliminate the uncertainty involved with the terminal value of the business with the ten year buyback eliminated. Out of nowhere STZ is now the 3rd largest beer company in the US with one of the world's newest production facilites. Will have to drink a few Coronas before I could imagine another deal that would beat this one.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long STZ

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

 

Most popular apps

In the world of mobile applications Facebook and Google are vying for users attention. According to Comscore apps from these two companies accounted for 1 out of every 3 minutes spent on a mobile app. Recent Comscore data suggest Facebook app usage has pulled right ahead of Google in their race for mobile dominance.

 
The Facebook data is amazing considering they only became a 'mobile' first company this year. Though Facebook did benefit from Apple pulling Google maps from the app store (see chart below). Facebook is also the owner of Instagram, owning 2 of the most used apps. 

 

 

Source: http://www.comscore.com/Insights/Blog/Facebook_Vaults_Ahead_of_Google_Maps_to_Finish_2012_as_number_1_US_Mobile_App
 
History has shown that advertisers will go to where the audiences are, as mobile usage increases both Google and Facebook will benefit. While the smaller mobile screen is seen as a disadvantage for advertising this is more than offset by the ability of mobiles to detect location and proximity. We are now seeing early signs from Google taking advantage of a world in which we are constantly connected.

Google this week have announced changes to adwords their advertising auction system. Among the most interesting changes are the ability to target location and time of day. An example given by Google is a cafe. The cafe can now target higher bids for people searching for cafes close to their location and can adjust bids higher around certain times of day like lunch. This additional targeting capability will likely result in increases to Google's mobile revenues per ad which have struggled due to the small screen.

Jason
 

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long FB and GOOG

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.