12-10-05 - 1

12-10-05

Saturday morning business update :

Gazprom could be a very good long term energy investment. It's the Russian natural gas company, and has the largest energy reserves of any publicly traded company in the world. It also may not be so ridiculously highly valued as the major western energy companies. The big question mark of course is Russia's continued corruption and government interference. Will Putin and his cabal allow Gazprom to operate as an independent company, or will they seize assets and profits? Most stocks in Russia are traded with a risk discount, and if the government ever reforms they'll all go up. I think reform is inevitable, but it may take a while, since Putin's successor will certainly be one of cronies, and their power structure may last a while.

What about media and cable companies? Many changes are afoot, between DVR's, direct content download, and recent moves by cities to create free wireless networks. The short answer is that not very much will change. A few companies may gain or lose profitability, but there won't be a vast shake-up of the system. For one thing, replacing advertising with payment will never happen. Advertisers pay far more to be seen than people are willing to pay for programming. So, downloadable media or whatever will still be primarily supported by advertisers (without advertisers, you'd have to pay something around $1 per view of a half hour show). Also, there's some talk of the death of TV. That's nonsense. TV sets may head towards being more like general purpose "monitors" than simple TV's, but that's been happening for a long time. Will the middle man (cable companies, TV networks) disappear? Will users get content directly from content creators? Perhaps a bit, but really the role of the middle man will just change. It's true the middle man may get weaker. The role of the middle man will still be packaging and distributing content, and combining it with advertising. Each content creator won't want to do all that on their own. Now, perhaps the biggest threat to cable companies is the growing movement towards free broadband access in many urban areas. If that becomes widespread, it undermines the real strength of cable companies, which is owning the broadband pipe.