29th: M&A surges by 50% in the first six months of this year
Sadly, very little time to blog today. I was not as effective as I could have been yesterday, so need to complete a few things before the weekend arrives.
As the headline above notes, M&A has surged 50% in the first six months of the year. A bit alarming, don't you think? The volume of merger and acquisition activity worldwide surged 50 per cent to reach $2,780bn (€2,067bn) during the first six months of the year, despite growing concerns among companies about a turn in the credit markets and fears that the cycle has reached its peak.
28th June: My picks from Essential Web, Library House
Spent most of yesterday at the Essential Web, Library House event at the iMax, Waterloo. For what it is worth, find below my picks for companies to watch in each of the key categories:
Search: Migoa - market opportunity in this space - should drive this companies growth.
Identity: I still stick with Garlik and my gut feeling is still that people will use their service over time.
Marketplaces: Seatwave & Wonga. I know there was quite a debate about the attraction of the Wonga business model, but I think there is a market opportunity in unsecured loans.
Online communities: Jaiku - no question whatsoever, that this one is going places. The Founder has massive executive presence & well, its simply a hit.
Ditto for WAYN. Both Jaiku and WAYN have hit on growing their user base pretty quickly and there is a special energy around both of these businesses that for me forecast - they are potentially very big winners.
Collaborating online: G.ho.st and Trampoline Systems for very different reasons. On a personal note, any man who can wear orange, as the Trampoline founder/CEO did, well there is just no stopping them. Seriously, if an outfit can make a statement, Trampoline is well on its way to something, fame - I hope?
Mobile: Rebtel, Shozu - both I have blogged about previously as one's to watch & new entrant, Mobank - as I am working with them.
Otherwise, the news on video is quite interesting:
Report: Streaming Media Ad Revenue to Hit $1.4 Billion in 2007, Digital Media Wire.
Salinas, Calif. - Streaming audio and video advertising is on track to grow 38% this year, to $1.37 billion, according to a report from AccuStream iMedia Research.
The firm estimates that pre-roll ads will make up 26.7% of ad spending this year and 28.5% in 2008, compared with embedded, or in-page placements, which will comprise 58.8% of gross billings in 2007, and 55.9% next year.
Ads sold against streaming network TV shows are expected to grow substantially through 2008.
Additionally, the firm projects that in-game video ads will grow faster than the overall market, but cautioned that "continued hesitation on the part of brands and agencies to tackle the chaos of the category suggests incremental steps toward mainstream exploitation."
MySpace to Launch Dedicated Video Site on Thursday, Digital Media Wire.
San Francisco - News Corp.'s MySpace online social network is set to launch a separate video site tomorrow, MySpace TV, that will feature both user-generated and other content that can be viewed without an account on MySpace, The New York Times reported.
In addition to user-generated videos, the site will highlight professionally-produced content, such as the "Minisodes" of vintage 80's sitcoms recently posted on the site by Sony, and TV shows and movies from NBC Universal and Fox.
Each MySpace member's page will also link to a dedicated page on MySpace TV, where all of the videos they have uploaded will be viewable.
"We haven't really freshened up our video offering since we launched it," MySpace co-founder and CEO Chris DeWolfe told The Times.
"We wanted to highlight the fact that we have a video destination on the Web with all this great content that we've acquired."
27th June: Blinkx raises the stakes in online video
During the RedHerring event of Oct last year, I had blogged about Blinkx as a company to watch and had been very impressed with the technology they were at that stage building.
Since then, Blinkx have been bought out by Autonomy, who had smartly held a stake in the business, with a view to an AIM listing or public offering. Yesterday, Blinkx went live with a system that listens to speech in clips to allow advertisers to target specific audience groups. Its nice to see the team deliver on their execution plans & also a bit nice for me to be validated in terms of believing it was a business with legs.
25th June: The threat to venture and the mid market as a result of the backlash against large buy-out (i.e. private equity)
I spent part of the weekend with friends who have an interest in private equity and as such one in particular who has been busilly attending the BVCA meetings, as well as the hearing at the House of Parliament. As said friend is currently focused on obtaining gainful employment working for a non-profit in the human rights area, voicing his opinion on the matter would be seen by some as counter-productive. Therefore, I will not focus on the tax issue being faced by private equity.
I will however, focus this blog on the fact that there is a significant difference between large buyouts, the mid-market, the lower mid-market and venture capital, itself. As anyone who has followed my blog knows, I was completely disheartened with my experience of institutional investors when I tested the waters late last and early this year on the feasibility of raising a European focused venture fund. As you can read my rather open soul searching on the matter in Jan-March, I will not digress. But, in short, institutional investors preferred the lower risk, and solid returns being seen by the larger buy-out funds and on the whole seemed to shy away from the smaller side of the market, which in my view actually does create and build new businesses. A shame, but I did learn the lesson, that you can take a horse to water, but can't force it to drink. A wise lesson.
However watching the Press, I have a significant fear of there being a backlash against all of private equity given the current uproar around the tax issue. Private equity currently covers a wide-spectrum of businesses and investment size focuses. Further, as one moves downstream from the larger buy-out firms, the smaller private equity and venture houses are not engaged on the whole on asset stripping or flipping businesses at 3-4x their money. Rather, on building solidly good businesses.
Anyone who operates in the venture space, or who invests in venture, or has ever built a business will tell you that building a business from the ground-up is a risky enterprise. The returns do not come quickly, rather operating in this space arises from a deep passion to build or create something unique and in doing so, create jobs and make a contribution to society.
The tax issue is a serious one, and one that will no doubt be addressed. But, can we not treat all investors in private equity as culprits? As there are some of us out here in the trenches working pretty hard and trying to do some good.
23rd-24th June: It's the weekend - time for a break!
1- You will never find anybody who can give you a clear and compelling reason why we observe daylight-savings time.
2- You should never say anything to a woman that even remotely suggests you think she's pregnant unless you can see an actual baby emerging from her at that moment.
3- The most powerful force in the universe is gossip.
4- The one thing that unites all human beings, regardless of age, gender, religion, economic status, or ethnic background, is that, deep down inside, we ALL believe that we are above-average drivers.
5- There comes a time when you should stop expecting other people to make a big deal about your birthday. That time is age 11.
6- There is a very fine line between "hobby" and "mental illness."
7- People who want to share their religious views with you almost never want you to share yours with them.
8- If you had to identify, in one word, the reason why the human race has not achieved, and never will achieve, its full potential, that word would be "meetings."
9- The main accomplishment of almost all organized protests is to annoy people who are not in them.
10- If there really is a God who created the entire universe with all of its glories, and He decides to deliver a message to humanity, He will not use, as His messenger, a person on cable TV with a bad hairstyle.
11- You should not confuse your career with your life.
12- A person who is nice to you, but rude to the waiter, is not a nice person.
13- No matter what happens, somebody will find a way to take it too seriously.
14- When trouble arises and things look bad, there is always one individual who perceives a solution and is willing to take command. Very often, that individual is crazy.
15- Your friends love you, anyway.
16- Nobody cares if you can't dance well. Just get up and dance
22nd June: Being truly wireless & the global entertainment and media business report
Its a rather busy day, when you get to the first thing on your to do list - blog at 4.12PM. The upside of today's busyness is that I now have a Vodafone wireless card which means that my ability to be truly connected is now a little frightening, as is my ability to work from anywhere. Not sure if that is a good thing or bad. However, the idea of sitting in little French cafe's and doing work this summer finally won me over.
Otherwise, PWC has just released their annual global entertainment and media business report which provides good news for those of us engaged in both media and convergence or convergent media. The global entertainment and media business will grow at an average annual rate of 4.9% over the next several years, rising from $81.2 billion in 2006 to $103.3 billion in 2011. Interestingly, the total spending on Web advertising, combined with fees paid by U.S. consumers to access content online, will rise at a 10.7% average annual growth rate, from $47.2 billion in 2006 to $78.4 billion by 2011. Not bad. Finally, spending on convergent platforms will exceed 50% of all global entertainment & media spending by 2011.
Spending on Convergent Platforms Will Exceed 50% of Global Entertainment & Media Spending by 2011: Internet, TV distribution and video games will be the fastest-growing global segments.
London and New York, 21 June 2007 - The global entertainment & media (E&M) industry is experiencing sustained growth and will increase at a 6.4% compound annual growth rate (CAGR) to $2 trillion in 2011, according to PricewaterhouseCoopers Global Entertainment and Media Outlook 2007-2011, released today.
Double-digit growth is expected for digital and mobile spending in each territory during the next five years rising to $153 billion by 2011. Spending related to the distribution of entertainment and media on convergent platforms (convergence of the home computer, wireless handset and television) is also growing at double-digit rates and will exceed 50% of global spending by 2011. Within the next five years, nearly half of the total industry growth is expected to be generated through online and wireless technologies and, during the same period, broadband households will grow by 300 million to 540 million subscribers and wireless subscribers will increase by 1.1 billion to 3.4 billion. The migration to digital formats is having an adverse impact on competing revenue streams while consumer-generated media is accelerating content fragmentation, the report says.
Jim O’Shaughnessy, Global Chairman, Entertainment & Media practice, PricewaterhouseCoopers, said:
“Content, distribution and technology companies need to aggressively seek out new relationships to accommodate the shift towards convergence. Furthermore, companies will need to test new business models to address increased fragmentation and intellectual property in a digital era. Deal activity across the entertainment and media sector is accelerating, driven by the migration to digital formats.”
Global advertising will increase at a 5.4% CAGR during the forecast period, rising to $531 billion in 2011 from $407 billion in 2006. Internet will remain the fastest-growing advertising medium, with a projected 18.3% compound annual increase to $73 billion in 2011. Advertising on the internet has truly come of age, and by 2011 will comprise 14% of the global advertising market. Out-of-home will be the second fastest growing advertising medium, with a projected 6.5% compound annual increase.
Key Drivers of Global E&M Industry
In every region, spending on convergent platforms will grow faster than other E&M platforms and will account for 72% of the total E&M growth during the next five years. Asia Pacific will be the fastest-growing convergent platform region with a projected 13.5% increase and double-digit growth is expected in Latin America as Internet and broadband penetration begins to gain momentum.
Economic expansion and a surging entertainment and media market are driving significant growth in Brazil, Russia, India and China (BRIC). Led by India and China, E&M spending in BRIC will continue to grow at double-digit annual rates during the next five years and will account for 24% of global E&M growth during the next five years. Spending for the BRIC countries will increase by a 14.7% compounded annually, expanding from $127 billion in 2006, to $251.5 billion in 2011. That gain will be nearly three times the projected 5.5% compound annual increase for the rest of the world.
Marcel Fenez, Global Managing Partner, Entertainment & Media practice, PricewaterhouseCoopers, added:
“The surge in broadband and wireless adoption is generating new digital revenue streams across multiple segments. Broadband growth is driving online advertising while the proliferation of next-generation wireless devices designed to play digital music, video games and receive TV programming is fuelling mobile distribution. For example, Asia Pacific spending on distribution of television programming on mobile phones is expected to reach $6.5 billion in 2011 from just $26 million in 2006.”
Regional Highlights
The US remains the largest but slowest growing E&M market, growing at a 5.3% compound annual growth rate reaching $754 billion in 2011. US spending on Internet advertising and access will surpass spending on newspaper publishing in 2009.
EMEA, the second largest market, will expand at a 5.5% CAGR to reach $617 billion in 2011. Led by Saudi Arabia/Pan Arab and South Africa, Middle East/Africa will continue to be the growth region, averaging 8.5% compounded annually during the forecast period. TV distribution, Internet advertising and access spending and video games will be the fastest growth segments for EMEA averaging double-digit compound annual increases during the next five years.
Asia Pacific will remain the fastest-growing region during the next five years, with the fastest economic growth and double digit increases in Internet, TV distribution, casino and other regulated gaming and video games. Spending in Asia Pacific will average 9.6% annual growth, the fastest of any region, increasing from $297 billion in 2006 to $470 billion in 2011. India will be the fastest growing during the next five years at 18.5% CAGR while China will continue to record double-digit annual gains that will average 16.8% CAGR.
Latin America's E&M market, the second fastest growing region, is projected to rise at an 8.9% CAGR to $68 billion in 2011. Canada is projected to expand at a 5.6% CAGR to $47 billion in 2011, with double-digit growth projected for Internet and radio/out-of-home advertising.
Selected Segment Highlights From The Outlook – Internet, TV Distribution and Video Games To Be Fastest-Growing
Internet Advertising and Access Spending: The global Internet market rose 21.8%, the fastest-growing segment in 2006 and the fourth consecutive increase in excess of 20%. Advertising rose 37.9% and access spending increased 18.8%. The migration of Internet subscribers from dial-up to broadband is the principal driver. Cable operators and telephone companies have introduced triple play packages that combine broadband with television and telephone service. Globally, Internet advertising and access spending is expected to grow from $177 billion in 2006 to $332 billion in 2011, a 13.4% CAGR.
Television Distribution: The global television distribution market, the second fastest growing segment, increased by 9.4% in 2006, an improvement compared with the 6.5% increase in 2005. Aggressive roll-out of Internet protocol television from telephone companies is stimulating competition and fuelling subscriber growth. Cable operators are migrating their subscribers to digital platforms that not only boost monthly subscription revenues but also expand the market for video-on-demand. Mobile television is emerging as an important distribution channel, particularly in Asia Pacific, boosted by new service rollouts and enhanced wireless devices. Globally, the television distribution market will increase from $161 billion in 2006 to $251 billion in 2011, a 9.3% CAGR.
Video Games: The introduction of the new generation of video game consoles and the associated increase in video game software purchases for those consoles boosted spending by 14.3% in 2006. New Internet-enabled consoles and growing broadband penetration will spur growth in the online game market while next-generation wireless devices will drive demand for wireless games. Globally, video game spending is expected to rise from $32 billion in 2006 to $49 billion in 2011, a 9.1% CAGR.
Casino and Other Regulated Gaming: Casino and other regulated gaming rose by 8.5% in 2006, led by new casinos in Macao, Las Vegas and other regions. Casino revenues in Macao, which has become a major gaming destination centre, surpassed the Las Vegas Strip in 2006. New casinos and upgrades of existing casinos will boost casino revenues. Globally, spending will increase from $102 billion in 2006 to $144 billion in 2011, a 7.2% compound annual increase.
Television Networks (Broadcast and Cable): The TV network market rose 6.2% in 2006, comparable to the 6.3% gains in 2003 and 2005, but significantly less than the growth in 2004, which had been driven by the Summer Olympics advertising. Multi-channel advertising will be the fastest-growing sector in each region, buoyed by large increases in digital households. High-definition television (HDTV), new channels, and economic expansion will also boost advertising on free-to-air channels. Globally, spending will increase from $172 billion in 2006 to $228 billion in 2011 at a 5.8% CAGR.
Sports: Sports increased 12% in 2006, the largest increase during the past five years, buoyed by the FIFA World Cup, the Winter Olympics, and the return of the National Hockey League (NHL) in North America. Competition in the TV distribution market is fuelling demand for TV rights fees, leading to record deals. Spending in the sports segment is expected to increase from $96 billion in 2006 to $124 billion in 2011, at a 5.2% CAGR.
Filmed Entertainment: Filmed entertainment rebounded in 2006 with a 2.9% advance following a 2.6% decline in 2005. A strong slate of films boosted the box office market in each region while supporting the home video market. Digital download-to-own streaming services will generate incremental revenue in the United States and EMEA. Box office will be enhanced by digital cinemas in the United States, EMEA, and Asia Pacific and by modern theatres and more screens in Central and Eastern Europe, Asia Pacific, and Latin America. Globally, filmed entertainment spending will rise from $81 billion in 2006 to $103 billion in 2011 at a 4.9% CAGR.
Radio and out-of-home advertising: The radio and out-of-home market rose 4.5% in 2006, down from the 5.2% annual gains during 2004–05 although an improvement compared with the 2.7% annual gains during 2002–03. Out-of-home was the faster-growing component with a 6.3% increase while radio rose by only 3.6%. Out-of-home will be fuelled by digital billboards. Improved out-of-home audience measurement systems will attract advertisers, and the expansion of captive video networks will also fuel growth. Globally, the radio and out-of-home advertising segment is expected to increase from $69 billion in 2006 to $89 billion in 2011, a 5.2% CAGR.
The Outlook also includes in-depth global analyses and five-year market forecasts for six other industry segments, including: book publishing, business information, magazine publishing, newspaper publishing, recorded music and theme parks and amusement parks.
Notes to Editor
About the Outlook
PricewaterhouseCoopers Global Entertainment and Media Outlook: 2007–2011, the eighth annual edition, contains in-depth analyses and forecasts of 14 major industry segments across five regions of the globe – the United States, EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada – plus a Global Overview. It is available in hard copy or electronically (PDF) for US$995 at http://www.pwc.com/outlook. The Global Overview is available separately for US$95 in hard copy or electronically, and individual segment chapters are also available for US$95 in electronic format only.
About PricewaterhouseCoopers
PricewaterhouseCoopers provides industry-focussed assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
20th June(b): And we have lift-off or better yet offices!
We, Imdad, have offices! We are in Paddington and overlook the water! So my request for offices near water was truly fulfilled. Thank you God & Mobank! Offices are courtesy of Mobank, a company for whom I will be serving as a Non-Exec Director.
Mobank will be launching next week at Library House, Web 2.0 on June 27th - watch for more details here!
20th June: Its all about location & monkey's & banana's
I attended the Mashup event last night which focused on location & mobile phone offerings. I'd love to share my thoughts with you, but, am a bit constrained for time this morning. As I need to be present in real life today - will try to come back later today.
Otherwise, the papers are filled with articles on the taxation issues being faced by private equity management teams - am refraining from making a comment on the same - as you lose if you do and lose if you don't. And, I hate to lose! I will however, leave you with an interesting story:
3 bananas in the Morning and 4 in the Afternoon.
Zhuangzi told this story to his disciples to make a point.
Once a zookeeper said to his monkeys: "You'll get 3 bananas in the morning and 4 in the afternoon."
All the monkeys were upset.
"OK. How about 4 bananas in the morning and 3 in the afternoon?"
Hearing this, the monkeys are content.
One should realize that sometimes a change in phrasing does not represent a real change.
ZhuangZi (369?-286? b.c.), Chinese folklore
19th June: Semel resigns, the future of news and the continued debate of private equity taxation
A bright and sunny Tuesday morning and I find myself in the vicinity of St Bartholomew The Great Priory Church. As I am again early for a morning meeting, I decide to have a look around. It's one of my favourite churches in London and one can get an Annual Pass for about £35, well worth the cost. The Church is one of the hidden gems of London and quite surreal in the early mornings with some choral music being played. A great start to the day!
Okay onto work. To begin, Yahoo! chief executive and chairman Terry Semel has stepped down after six years to be replaced by co-founder Jerry Yang. Yahoo has also promoted Susan Decker, who was named as executive vice-president and head of advertiser and publisher group last December, as president of the company. Semel has been under increasing pressure from investors for both the company's stock performance and seeing competitors such as Google surge ahead in digitial media. A shame but not a surprise. You can read more about this below.
Additionally, analysis I read this morning discusses how news and media organisations should embrace online aggregators such as Silobreaker. I just cannot post this post with the full article, I think its the wireless connection at the Starkbuck's I am sitting in, so see link to article at the link below or I have uploaded as a document. Well worth a read.
http://www.dmwmedia.com/news/2007/06/18/analysis-newspapers-should-embrace-online-aggregators
Finally, Guy Hands has also leaped into the private equity tax debate, read about it below.
Terry Semel Resigns as Yahoo CEO; Jerry Yang to Assume Role, Digital Media Wire
Sunnyvale, Calif. - Facing increased pressure from investors over his company's lackluster financial performance in recent quarters, Yahoo on Monday said that Terry Semel has stepped down as its CEO, to be replaced by company co-founder Jerry Yang.
Semel will retain the role of non-executive chairman, serving as a key advisor for senior management.
In another move, Yahoo named Susan Decker, considered by many to be the eventual heir apparent of Semel, as its present. Decker had served as Yahoo's executive vice president and head of its advertiser and publisher group, and previously as its CFO.
Semel said that the move was largely his decision.
"As we discussed my future goals and plans, I was clear in telling the board of my desire to take a step back sooner rather than later," said Semel, who joined the company in 2001. "This is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential -- it is the right thing to do, and the right time is now."
The news sent company shares surging more than 6% in after-hours trading.
Terra Firma CEO leaps to private equity defence
Guy Hands, the chief executive of Terra Firma, has made a robust defence of the taxation of private equity bosses, arguing that the low tax rate they enjoy is fully justified.
In a letter to the Financial Times, Hands said that the carried interest paid out to buyout bosses should only be taxed at 10% as it rewarded risk and entrepreneurship.
'While the definition of carry may vary across private equity firms, it was originally intended to cover a payment to individuals of a private equity firm who invested their own money,' Hands said.
He questioned whether listed company executives would be happy to accept the same level of risk as private equity heads did in order to enjoy a lower tax rate.
'I do wonder how many FTSE100 chief executives would be prepared to take the risk of abolishing their bonuses and option schemes in return for capital gains-based carry which would only start to be paid if they delivered real shareholder value in excess of 8% compound over a seven-year period,' Hands said.
Hands also issued a veiled criticism at veteran buy-out heads who had benefited from the low tax on carried-interest in the past but had now publicly criticised the tax rate.
'These grandees and private equity critics might all do well to think through the long-term consequences of any proposals they make, rather than playing to the gallery,' he said.
14th June: Back to business
Its back to business and already, my mini-break seems a lifetime ago. In part, I was reminded again how much the airline you fly with determines the kind of experience that one has. Unfortunately, after ten years of never flying Continental, I flew back with them and after severe delays - with no notice being given to their customers - I remembered why I had stopped flying the friendly sky's with Continental Airlines.
Hopefully, I will be in a more positive mood tomorrow!
