Long or Short Capital

I am pleased to introduce a new series in which I simplify complex analysis into 2×2 matrices. Why am I doing this? I was trained at a management consultancy and 2×2 matrices are now in my DNA as well as being a stipulation in the contract I signed with the devil to get the job.

It turns out that any media business can be described by two variables: the amount of product, information, or entertainment being produced [referred to hereafter as Strategy] and the resulting value creation. The key question for each company is to look at each of these two critical valuables and ask: Less or More?

Google: More is More
Strategy: MORE. Google (NASDAQ: GOOG) is producing more of everything. After originally launching in search only, Google now provides email, maps, IM, photo management, and online videos of trivialities (via the YouTube acquisition).
Value: MORE. Google now has a gazillion dollar market cap.

Yahoo: More is Less
Strategy: MORE. Yahoo (NASDAQ: YHOO) has the #1 portal, #1 email service, #1 prescence in the key Asia market, and leading positions in pretty much every other vertical. They are also — like Google — investing tons of money in servers to make their services speedier and have recently acquired many interesting companies.
Value: LESS. Despite the great assets involved, Yahoo is run by a man who has a hard time speaking the English language, whose daughter has starred in a reality show about spoiled kids, and who doesn’t know how to use email. As a result, MORE becomes LESS.

Clear Channel: Less is More
Strategy: LESS. In late 2004, Clear Channel (NYSE: CCU) embarked on a bold plan (incredibly) titled Less is More. The stated goal of this plan was to reduce the amount of “clutter” (i.e., ad units) per hour on its radio stations in order to boost listening. The super secret goal was to push advertisers from 60 second commercials to the more expensive 30 and 15 second ad formats. This program appears to have been at least modestly successful due to a significant year over year decline in sucktitude at Clear Channel radio stations.
Value: MORE. Clear Channel’s stock has recently rallied and management has accepted a buyout offer from private equity firms. Including the 2005 spin-outs of Live Nation (NYSE: LYV) and Clear Channel Outdoor (NYSE: CCO), Clear Channel shareholders have done pretty well for themselves since the Less is More strategy was implemented.

Newspapers: Less is Less
Strategy: LESS. Newspapers are reducing everything in sight including: employees, subscribers, revenues, reporting staff, and even the physical size of the newspapers. In fact, they have cut everything except their margins…a fact which has prevented them from reinvesting in growth areas like they should be. In short, they are screwed.
Value: LESS. Newspaper stocks go down every day.

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