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March 30, 2018

Analyze This

In the age of television business disruption, analysts seem to be quoted in every business story. But just who are these gurus?

Dan Frankel
  • Photoillustration By Todd Reublin

From newspapers and news sites to cable news and magazines like this, analysts are everywhere.

To lend unbiased credibility and substance to complicated stories, reporters often turn to known experts in such fields as business, health, energy and, of course, entertainment.

The reader very often has no idea who these people are, but the very fact that known news outlets seek their opinions tends to anoint analysts with valuable credibility.

"The term analyst gets thrown around a lot, because people have realized that it's a way to sound like an impartial expert," says Alan Wolk, who often appears in print and online as an analyst, while running his own New York–based independent consultancy firm, TV[R]EV.

Coming off as an expert "plays well with editors who are looking for someone to comment on a breaking media-industry news story, as a comment from an analyst is seen as coming from someone who does not have a horse in the race," he adds.

None of this is to say that most analysts are flimflammers, lending hollow voices to bolster fake news. Wolk is a Boston Law School grad turned tech-industry strategy professional. He's spent years consulting for media and tech companies on the "second-screen" behavior of consumers.

"We are in constant discussion with companies about their products and services through briefings and face-to-face meetings," Elizabeth Parks says. She's senior vice-president of Dallas-based research firm Parks Associates, which employs analysts covering everything from media technology to health care to energy.

The oft-quoted Craig Moffett, who has spent more than 20 years sharing his insights with investors, helping them make informed decisions on cable, wireless and media stocks, describes his Harvard MBA as "table stakes."

"To be any good at the job, you don't just need to understand finance," he says. "You need to understand microeconomics, game theory, technology and engineering. And in the case of media, you even need to understand and have a good feel for the creative process. And, just as importantly, you need to have a very, very deep Rolodex."

Moffett's declarations don't just move news stories. They move stock prices, though he's careful to say that is not the goal of his work.

"Once you have achieved a certain level of status as an analyst, it is actually easy to make stocks move," Moffett says. "But only a rookie analyst would ever want to do that. You certainly aren't doing your clients any favors by moving a stock around."

Moffett is frequently quoted on the pages of the Wall Street Journal, on cable news networks like CNBC and in publications like emmy, talking about such things as the impact of cord cutting on cable and satellite TV companies. Does keeping a high profile in the press help his firm, New York–based MoffettNathanson, sell research?

"No, I don't think being quoted drives business per se," he says. "At least, that's not why I do it. Speaking for myself only, I do it because I really respect what reporters do, and I want to be helpful when I can. And I suppose I also have an innate desire to see that the story is right."

Parks agrees, saying, "We don't look at media sightings as a driver of sales, but as an opportunity to share information."

Regardless of motivations, these analysts seem to be getting worked by the press more in recent years. Their insights help readers understand complex media mergers like AT&T's drawn-out purchase of Time Warner Inc. or Disney's massive takeover of 21st Century Fox.

More than anything, in a world where the phone is now the TV, and where over-the-top insurgents like Netflix and Amazon are amassing market valuations and audiences beyond those of traditional studio and network powerhouses, analysts provide a bit of a compass.

The never-ending news cycle of ground-shifting media and tech mergers, game-changing device launches and shocking cord-cutting announcements — not to mention daily executive hirings and firings — have put these experts in high demand.

"With services like OTT that are truly disrupting the traditional providers of TV, there is a great need for companies to understand where future revenues and subscribers are going to come from, and to ensure they stay up with the latest offering," Parks explains. "The OTT space is really hot right now, because there are so many new offerings out there."

Yet, with so many publications quoting so many analysts in so many stories, the nomenclature gets confusing. There are many types of analysts. And there are many levels of credibility and quality.

There are definitely different flavors of analysts," Wolk says. High-profile Wall Street analysts like Moffett, BTIG Research's Rich Greenfield and Wells Fargo's Marci Ryvicker "are actual analysts," he adds. "That's a legit and common career path at financial firms who employ financial analysts to cover a wide range of industries, not just media."

Whether they work directly for an investment bank like Wells Fargo, Deutsche Bank, Jefferies Group or Barclays, or for an independent investment research firm like MoffettNathanson that serves the investment community, the essential job of the Wall Street analyst is to make one of three recommendations on a stock: "buy," "sell" or "neutral."

Research, Moffett says, is at the heart of the profession. "Each of us is supported by a team of incredibly talented research associates," he explains. "They are the secret sauce of everything we do. Michael [Nathanson] and I are a bit like orchestra conductors — we identify questions that need to be answered. But more often than not, it is our associates who do the heavy lifting to find out the answers."

Meanwhile, research companies like Parks Associates, Leichtman Research Group, The Diffusion Group and the powerful SNL Kagan form another class of analyst, serving a broader client list than just the investor community. "Market research is critical for companies who are bringing new products to market," Parks explains, citing one type of analyst client.

The economic model for these firms is different from that of the typical Wall Street shop, which offers its research to investor clients based on commissions and fees it collects. There, the research is an enticement to keep investors making profitable, high-commission trades.

Research companies like Parks, on the other hand, tend to sell reports à la carte to anyone who wants to buy them. For example, the recently compiled report "OTT Video & TV Everywhere: Partners, Alternatives and Competition," spearheaded by Parks's oft-quoted senior director of research, Brett Sappington, is available directly at the Parks website for $3,500.

How profitable is all this research? Hard to tell. Investor research economics are tied inextricably to the obscene profits of investment banks. And shops like Parks are most often privately held. But given its staff of nearly 20 researchers and analysts, Parks appears to be thriving. As does five-year-old boutique shop MoffettNathanson, which recently branched out into software and retail.

Beyond research company pros, meanwhile, Wolk points to a third class of analysts — "people who don't really fall into any category, who do a mix of journalism and consulting, and whose knowledge is based on the relationships they've cultivated over the years."

Wolk himself, a former head of corporate strategy for technology company KickApps, seems to fall into this category, as does Colin Dixon, a former Oracle and Microsoft engineer who analyzes the digital media business at his Bay Area boutique shop, nScreenMedia.

Often, former top-level executives who have retreated into their own private consultancy firms, or into academia, are called upon to comment in the press. Former CBS Sports president Neal Pilson, who now serves as an adjunct professor at Columbia University, qualifies here, as does former ESPN exec Dennis Deninger, who is on the faculty at Syracuse University.

"The problem there," Wolk says, "is that the academics are frequently so far removed from what's actually going on that their comments don't really add anything."

Particularly on the Wall Street side, analysts tend to be minor celebrities with exclusive access to some of America's most powerful execs. When Comcast chief Brian Roberts or CBS Corporation head Les Moonves speak during quarterly earnings calls or other investor events, hundreds of journalists may be on the line or tuned into a webcast. But only the analysts are allowed to ask questions.

Within the community of trade and business journalists, these research pros often assume outsized presences.

For example, when the cable industry convened its final INTX trade show in Boston in May 2016, Moffett and Wells Fargo's Ryvicker appeared alongside Charter Communications CFO Christopher Winfrey in what was arguably the conference's only marquee panel presentation event.

They discussed the threat Google Fiber poses to cable. One media investment analyst has been accused of taking his notoriety too far. On his popular blog, on panels and in social media, BTIG Research's Rich Greenfield is known for staking strong positions on companies and using pungent language to describe these positions.

As Disney has struggled to deal with ESPN's shrinking market position, Greenfield has been the most outspoken critic of the conglomerate and the channel, drawing the ire of chief executive Bob Iger and other Disney brass. At one point he was even banned from asking questions of Disney execs during investor events. His behavior has not gone unnoticed.

"In his courtship of tech companies, availability to media and tech reporters and alignment with hedge funds, no one may have contributed more to the decline of traditional TV stocks this past summer and fall and to the rise of the new tech-centered TV industry — especially his most passionate cause, Netflix — than this analyst from BTIG, a largely undistinguished broker-dealer," wrote media-business pundit Michael Wolff, in a Greenfield hit piece The Hollywood Reporter published in 2016.

"His influence has left traditional media companies not just enraged about what they see as his grandstanding, hyperbole and partisanship, but flummoxed about exactly how Greenfield got to be the first and last word," Wolff added. (No stranger to controversy himself, Wolff has recently been in the news for his book Fire and Fury: Inside the Trump White House.)

Perhaps out of professional respect, Moffett wouldn't comment directly on Greenfield's contentious relationship with some of his peers. But Moffett's partner, Nathanson, did refer to the BTIG analyst's ESPN criticism at one point as "hyperbolic drivel."

"The tone of good research should be serious, not frivolous, and it should never be bombastic," Moffett says.

"That doesn't mean good research can't have a measure of humor to it — the industries we cover can be genuinely funny at times. But the tone should always reflect the fact that picking stocks is hard, and that the best way to serve one's clients is to present arguments clearly and dispassionately, with transparency about the pros and cons of one's supporting data, and with transparency about where we might be wrong."

Wolk adds: "There are analysts who don't have a deep knowledge of the industry who make a career out of making outsize predictions that they know will generate headlines."

Cord cutting, he adds, "is a good example of a topic where the more outrageous the claim, the more likely it is to receive some sort of coverage, regardless of how shoddy the research is or how speculative the claim." Analysts who do their jobs responsibly tend to endure, Wolk believes.

"I find that the people who don't go for the outrageous claims and take a more measured approach — the ones who lay out a few possible outcomes — those are the people who actually know what they're talking about," he says. "They understand that the industry is so volatile that no one can accurately predict what might happen five years out with any real clarity, and that every scenario has several possible outcomes."


This article originally appeared in emmy magazine, Issue No. 2, 2018


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