UBS Media Conference Kicks off With Deals Pitch, Ad Forecasts
"We're living through a hinge of history," UBS banker Aryeh Bourkoff says about the fast-changing industry and argues that it could be ripe for some transformative deals.
NEW YORK - The 39th annual UBS Global Media and Communications Conference kicked off here Monday morning with the latest advertising forecasts, the suggestion that time is ripe for transformative deals and a look at how the media and entertainment industry has changed since the event's first edition.
In his opening remarks, Aryeh Bourkoff, vice chairman, head of investment banking, Americas at UBS, highlighted the digital transformation of the industry. And he pointed out that there is "an aweful lot of powder dry right now - perhaps too much" in the media, entertainment and technology world in terms of cash, which could be used for deals, further shareholder returns, such as dividends, and the reduction of debt.
He pointed to a quarter trillion dollars in cash that such companies as Apple, Google, Time Warner and others are sitting on when looked at on a combined basis. Plus, top private equity firms are holding $140 billion in cash, he said.
If history is a guide, this could be the time for "some game changing, transformative deals," Bourkoff said in putting on his banker hat. " Let's put spark to all that dry powder," he encouraged industry and Wall Street attendees in his deal making pitch, highlighting that UBS is number one in media and related M&A banking in various metrics. The firm has about 150 bankers in the space around the world.
"Quarterly results are crucial, but there’s also a place - a very strategic place - for vision focused on the long term," Bourkoff said about the need to look at deal opportunities for the longer-term. "Success is a balance of looking at quarters, and looking at decades. Tomorrow’s winners will take smart risks based on clear vision, grounded in certain truths: new content, new models, leveraging new technologies, knowing what consumers want even before they know it - providing appropriate rewards for companies that generate growth."
Sirius XM Radio CFO David Frear in one of the UBS conference day’s first sessions also mentioned potential acquisitions, if his company finds any that make sense, as one way the satellite radio firm could use its cash in addition to rewards for shareholders.
But Frear signaled he was not rushing to any deals. Having cash even in the absence of deals will provide “a great cushion for when things go wrong in the world,” he told Wall Street attendees.
Overall, the annual UBS conference, known as "the longest-running show on Wall Street," kicked off to a packed house at midtown Manhattan’s Grand Hyatt hotel. More than 2,000 attendees and around 90 presenting companies mean it will be the largest edition of the event ever, Bourkoff said.
But the media world has changed significantly since the conference's inaugural edition in 1972. Back then, Pong was a video game success, Steve Jobs graduated from high school and The Godfather topped the box office.
In one sign of the changes, a small Formula One race car was parked on the conference floor, encouraging attendees to try out an official Formula One video game.
Amid the digital revolution, "we're living through a hinge of history," and the question is which way it will swing, Bourkoff said, adding that the conference will explore where the industry stands and where it can go from here. He then cited Liberty Media chairman John Malone who once told him: "Conventional thinking is usually right, but seldom profitable."
Just before the conference kicked off with a much-anticipated annual advertising panel about the latest ad forecasts, UBS analyst John Janedis also tweaked his 2012 ad forecast. Given stronger than expected third-quarter ad growth of 3.2 percent in the U.S. versus his 2.0 percent forecast and expected "larger benefit from political and higher Internet ad growth next year," he raised his 2012 advertising growth estimate from 3.6 percent to 4.2 percent. His fourth-quarter forecast is unchanged at 1.4 percent growth.
But Janedis cautioned: "If scatter pricing for TV and cable networks does not improve, risk will be to the downside, and we remain cautious on the domestic ad market."