So subs are going down - and have been for years - but revenue keeps going up.
What am I missing?
90% of their revenue is from affiliates. The other 10% is from advertising. Which means that roughly $650 Million (90% of 2019 Revenue - $720 Million) can be attributed to 6.5 Million subscribers. Back of the envelope calculation: the average subscriber is paying roughly $100 per year. How much more value can be extracted from subs?? If anything, the price of a subscription and number of subscribers will continue to go down due to further decentralization of media industry.
If I'm a die hard Knicks fan, why wouldn't I just pay $68 / year for all 82 games on NBA League Pass?
Chamath Palipatiya recently lambasted media companies for "not having relationships with their customers". I tend to disagree with him on a bunch of topics, but I think he's right about this.
If I'm a media company and still using an intermediary for distribution, I am not creating maximum value.
Perhaps MSGN knows that they can't charge that much on a standalone basis, which is why they're not really fighting the status quo.
MSGN has an app - MSG Go - which is a direct line to their customers. Shouldn't they be pursuing this more aggressively? They should be pulling a Frank Lucas and going straight to the source (DTC).
At the end of the day, their customers are currently cable companies whose purchasing power is dwindling. If they go DTC, subs are not willing to pay that much. Sure, there are some hardcore fanatics but the bandwagoners won't pay too much to watch the Knicks, Rangers, etc.
So it seems like they're damned if they do (go DTC and lower fees/subs), damned if they don't (stick with status quo and extract less fees from dwindling cable companies)..
Maybe none of this matters - as long as they continue to pay down their debt, and EV holds, value will filter into shareholders' pockets.
Thoughts???