Since March 1, broadcast has soared from 83 3/16 to 147 9/16, a 77%
ascent.
April 12, 1999
Dow Jones Newswires
SMARTMONEY ONLINE: Is There Another
Broadcast.com?
By JOSHUA ALBERTSON
Dow Jones Newswires
NEW YORK -- This much is clear: Internet investors are not much for
patience.
So when word spread last month that Yahoo! (YHOO) had designs on
broadcast.com
(BCST), well, that pretty much sealed the future of streaming media.
The future,
investors declared with wallets open, is now.
Never mind that, for most of the world's Internet users, streaming
media is still just a
conversation piece (so to speak). And never mind that most of the pipes
that deliver
data and video to homes and offices still aren't fat enough to enable
high-quality
broadband programming.
The future is right there in the stock prices of broadcast and friends.
Since March 1, broadcast has soared from 83 3/16 to 147 9/16, a 77%
ascent.
RealNetworks (RNWK), which supplies the technology that fuels most of
the Internet's
multimedia offerings, has surged 234% during that same span, from 70
1/8 to 234. And
InterVu (ITVU), a broadcast-like delivery channel, has run from 20 1/2
to 67 7/8.
That's more than streaming, it's gushing. But unlike some of the other
pockets of frenzy
in the Internet's development, not too many industry watchers are
flinching at this
action. Two hundred percent in six weeks might be a little extreme, but
then again,
according to these investors, it's only a matter of time before
streaming media dominates
the Internet.
"It doesn't really matter who you are," says Phil Leigh, an analyst at
Raymond James &
Associates. "If you are going to be a major factor on the Internet,
you're going to have
to have streaming media." And so it is that traffic-heavy Web sites
like Excite (XCIT),
Yahoo and CNET's (CNET) Snap.com are gearing up to offer suites of
viewing options
that reach far beyond text and still-frame video. The alternative, says
Leigh, is to be left
behind. "There really isn't any choice," he says.
But while the Web is on its way to multimedia excess, the path wasn't
necessarily clear
to investors during the Internet's infancy or even months ago, during
its adolescence.
As recently as October, broadcast was trading for less than $20 a
share.
That Yahoo was willing to pay $5.7 billion for broadcast is testament
to the potential of
streaming media. At the same time, it's a nod to the tremendous lead
that broadcast has
built in the race to aggregate multimedia offerings.
"There's nobody visible in its rearview mirror right now," says Leigh.
"But the future of
streaming media is sanguine, and broadcast.com won't be the only one
doing it.' The
trouble for investors (those that missed broadcast's six-month, 650%
surge) is that the
rest of the pack is either trading in the stratosphere by association,
or still outside of the
public-trading realm.
InterVu, for instance, has forged alliances to provide video content to
CNN.com and
Snap, but grossed less than $2 million in 1998. At 67 3/8, the stock
was up about $10
alone in midday trading on Monday. That's about 400 times trailing
revenue - pricey
even by broadcast standards. Still, InterVu has enough streaming
know-how that it
might find itself in the crosshairs of an online entity desperately
seeking multimedia
programming.
Then there's the uber Internet property CMGI (CMGI), which has poured
$100 million
into a new Web programming entity. The new venture's leadership (Neil
Braun, formerly
of NBC, will manage the enterprise) coupled with CMGI's success in
developing
new-media concepts should land the project on the multimedia map. But
until CMGI
decides to bring the subsidiary public, investors looking to get in are
forced to play the
holding company. That may not be so bad (CMGI has barely stopped to
breathe on its
way from 22 to 300 during the last 12 months), but it's no streaming
media pure play.
Meanwhile, investors are having trouble containing their enthusiasm for
audio-only
streamers as well. Audiohighway.com (AHWY) climbed from the single
digits in
mid-March to 34 1/8 on Thursday before cooling off on Friday. It was up
again in
midday trading on Monday. Leigh says to look for strong performances
from Launch
and Musicmaker.com, both of which have filed for initial public
offerings. For more
innovative streaming media content on the nonpublic side of the aisle,
check out
Quokka Sports.
There are also public Internet movers like SportsLine USA (SPLN), whose
cache of live
offerings is growing every day. But it won't be long before rewarding
SportsLine for its
multimedia capabilities will be like recognizing CBS (CBS) for its
ability to air television
programs.
"SportsLine's going to have streaming media, but so is AOL (AOL) and
Excite," says
Leigh. "Everybody is going to have multimedia content." Of course, the
content
aggregators and producers still need software to make their operations
go. And that's
where RealNetworks comes in.
Analysts estimate that the company's RealPlayer enables 85% of the
Web's streaming
media pages. And the presence of RealPlayer on user's desktops gives
the company an
Internet reach matched only by the Net's biggest names.
So even if Real's own programming network, RealGuide, continues to
trail broadcast, the
company stands to realize an avalanche of advertising revenue. "It's a
pretty
phenomenal franchise they've created on the Web," says analyst Rob
Martin of
Friedman, Billings, Ramsey, who listed Real as his "focus stock" of the
year back in
January.
The specter of Microsoft (MSFT), which recently integrated its Media
Player into the
latest iterations of Internet Explorer, still looms over RealNetworks,
but analysts
continue to slide their price targets upward as RNWK rises. Jamie
Kiggen of
Donaldson, Lufkin & Jenrette recently estimated that the stock should
trade at 250. Of
course, that was before the company said on Monday that it would team
with IBM to
develop a system to distribute music over the Internet. The stock is up
almost 30 points
on the news, and Martin has upped his price target from $200 to $300.
"I continue to say
that this is a core franchise on the Web and should be a core holding,"
Mart in says.
As with the rest of these screaming, streaming media concerns, there's
not much more
easy money. And while the active investor might make a few dollars
playing the ups
and downs, companies like Real and broadcast are not likely to fade
away. Inflated
valuations or not, it's probably worth hanging on for the ride. |
