Online audio, video growth makes it attractive
acquisition
03/24/99
By Alan Goldstein / The Dallas Morning News
A curiosity little more than a year ago, the often balky and jerky
broadcasts of audio and video over the Internet now are increasingly
believed to represent much of the future of electronic communications.
And that realization makes Dallas-based Broadcast.com Inc. - which has
done much recently to bring Internet broadcasts to the public's attention -
an attractive acquisition candidate, analysts said Tuesday.
Yahoo Inc. has been in talks for a week about acquiring Broadcast.com
in a stock deal, according to news reports. Officials for both companies
declined to comment Tuesday. Analysts expect other potential buyers
may come forward, including America Online Inc. and Microsoft Corp.
Broadcast.com's appeal is its reputation as the leader in sending
multimedia shows over the Internet, thanks to high-profile broadcasts
including President Clinton's grand jury testimony in September and a
Victoria's Secret fashion show last month.
"Broadcast.com has an organization, a franchise and a brand name that
are all valuable," said Richard Shaffer, principal of Technologic Partners,
a research firm in New York. "It has the incumbent's advantage."
The reported negotiations come amid a growing sense that the Internet,
dominated by text and graphics, will increasingly feature audio and video
as users connect through faster connections that allow smoother images
and clearer sound.
Underscoring the trend are efforts by television networks such as NBC
to invest more resources in the World Wide Web. At the same time, a
so-called broadband infrastructure is finally being built by cable and
telephone companies to allow for high-speed traffic.
Santa Clara, Calif.-based Yahoo, which initially helped computer users
search the Web, is now one of the Internet's leading media companies,
providing news, financial data, chat, driving directions and a host of other
services.
For Yahoo to remain a leader, it will need to stake a claim in Internet
multimedia broadcasting, and the fastest way to do that is through
acquiring Broadcast.com, said Phil Leigh, an analyst with Raymond
James & Associates Inc., a brokerage based in St. Petersburg, Fla.
Although Broadcast.com has no unique technology, it is now big enough
that the barrier of entry to becoming a significant rival has become
substantial, said Mr. Shaffer. Internet companies like Yahoo have to
decide whether it is cheaper to buy them out or to take them on, he said.
Broadcast.com also became a leader in short order. It was founded in
September 1995 by Mark Cuban and Todd Wagner, two Indiana
University graduates homesick for Hoosier basketball. By retransmitting
a local radio signal over the Internet, they could listen to the games in
Dallas.
Now, the company broadcasts nearly 400 radio stations and 40 TV
stations. Broadcast.com wowed investors with a hot initial public offering
last summer. Like many Internet companies, it loses money. Last year,
Broadcast.com lost $14.9 million on revenue of $22.4 million.
But Broadcast.com executives hold the promise of profits through
business services, such as transmitting analyst conferences, executive
speeches and sales meetings.
"The transmission of AMR Corp.'s annual meeting, for example, is not
the sort of thing you'll find on network radio, but there are probably tens
of thousands of Americans who do care about that and would tune in if
they could," Mr. Shaffer said.
Business services are increasingly important to Yahoo, too. As successful
as Yahoo is as a consumer brand on the Web, it wants to build its
recognition with corporations, said Ron Rappaport, an analyst with Zona
Research Inc. in Redwood City, Calif.
"There's no doubt in my mind that Yahoo is about to take very significant
steps in the business arena," Mr. Rappaport said. "Buying
Broadcast.com might be a smart move for Yahoo."
Still, analysts said there is no compelling reason that Mr. Cuban and Mr.
Wagner, who run the company and remain its largest shareholders,
would feel they need to sell now rather than hold on to their stock. "It's a
hard decision," Mr. Shaffer said. "And it's not only economics. It's ego."
Yahoo has a history with Broadcast.com. It invested $1.35 million in the
company, then called AudioNet, in January 1998. As part of a broader
deal, Yahoo agreed to distribute some of its multimedia broadcasts.
Yahoo generally has been reluctant to part with its shares for acquisitions,
in part because its stock has been going up so much. But analysts said
Yahoo may be increasingly willing to use its shares as currency, noting
that the company has a pending deal to buy GeoCities Inc. for stock.
.......................................................................some time ago I called your attention to broadcast.com....just thought some of you would like to read this news release. |
