In a sign of how the structure of the Australian economy has changed over the past 5–10 years, the battle for Channel Ten feels like it’s almost playing out on the sidelines. And the changes to the media ownership laws that went through last week (which opened up the field for media sector mergers) also earned a bit of a yawn.
That’s because the mainstream media model — both here and internationally — has become increasingly irrelevant in the digital world. TV, print and radio just don’t command the advertising revenue they once did.
And when you don’t have the money, you don’t have as much power. Or, evidently, as much nous.
A case-in-point is the handling of the Ten bid by so-called media moguls Bruce Gordon and Lachlan Murdoch. In short, a few months ago they pulled their commitment to fund Ten, and thus pushed it into receivership. The plan was to buy it back from the administrators on the cheap.
But in came US broadcaster and creditor to Ten, CBS, who made a bid for the company. Gordon and Murdoch tried to counter following changes to the media ownership laws last week (which now allows News Corp to own Ten) but that attempt was scuttled by the NSW Supreme Court yesterday.
As I said, media moguls don’t appear to have the power they once did. Which is simply a reflection of the waning power of traditional media.
The world is moving from broadcasting to narrowcasting. There is so much content diversity these days that the old one-size-fits-all model of traditional media (basically, telecasting to a broad consumer group) no longer works.
Fragmentation is in. Print media has already been hit hard. That will continue. TV has been impacted too, and it will only get worse.
And radio, probably the most immune form of media to the changing environment (so far), will soon be hit by the rise and rise of podcasting.
As the industry fragments, so does the wealth and power of those who once had control of a near monopoly on the flow of information.
A good example of the increasing irrelevance of ‘old media’ is the News Corp share price. Here it is over the past 10 years. It’s done absolutely nothing. And it hasn’t paid much in the way of dividends, so it’s not as if you’re getting an income while your capital is treading water.
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The standard argument is that this increase in information diversity is good. And, broadly, I think that’s true. The concentration of information in the hands of a few is never great for any society.
But there is a counter argument. That is, in the world of ‘narrowcasting’ people increasingly consume media that suits their existing biases. They burrow deeper into their own ‘narrow’ beliefs, reinforcing their own views and becoming less tolerant of other’s, because they’re simply not exposed to them.
My kids rarely if ever watch TV in the traditional sense. They watch it on demand. That is, they only watch what they want to watch.
There’s parental guidance of course, because they’re still young. But as kids get older there is a risk of them consuming a very narrow slice of information. That’s not good for anyone.
There’s no real solution to this. Except that parents have a responsibility to raise curious kids who read a lot. This at least gives them the tools to exercise curiosity as they get older.
What has all this got to do with investing?
Well, we are all slaves to our biases. It’s not just kids that we need to look out for. We need to see the same risks in ourselves.
I would wager that most of the investing errors you make are a result of an existing bias you have. For example, you may have sold your stocks when Trump got voted in because you think he’s an idiot. Wrong move. You see, the market doesn’t care what you think.
Anytime you look back on an error and say, ‘I can’t believe I did that’, or ‘what was I thinking’, it’s probably because you did it while on autopilot, reacting to inbuilt biases that unconsciously developed over years and years.
These are errors that everyone makes. But the good investors (and especially the professionals) are at least aware of them. When you are aware, you can take steps to counter their impact.
Don’t underestimate the impact this can have on your portfolio performance.
Think about the common errors you make in investing. Is there a theme? Are you always incredulous that you’ve managed to do the same thing, again?
When you examine your mistakes and your losses — and I mean really examine them, painful as it may be — you’ll find a wealth of information. If you’re honest with yourself, you’ll find the right information and, applied correctly, that will be very profitable over the long term.
I’ll take up this topic again tomorrow, because it’s an important one, which every investor can benefit from.
Editor, Crisis & Opportunity