For Paul Kagan, the professional journey from media junkie to media guru began with a job as a movie usher in what he recalls as “a classy art house” in New York.
Decades later, the firm he founded could be described in the same terms. The 75-member Carmel company churns out nearly 30 newsletters on various aspects of the movie, television and cellular industries, and dispatches analysts to conduct seminars around the country.
Kagan, 52, is scheduled to moderate a panel discussion this morning at the Western Cable Television Conference here on “Creating a Stable Environment for System Values.”
Paul Kagan Associates averages 15 phone calls a day from reporters tracking various media developments, especially in cable television. Not surprisingly, there are more than 1,000 citations to the firm in the Nexis database, which monitors major newspapers, wire services and magazines.
“I did all different broadcast jobs,” Kagan said in a recent interview. “I came to understand the value of investing in the business in the bull market of 1967, and I realized that there wasn’t that much understanding of value” of media properties. “My job is to determine value.”
Kagan’s first big idea, during a brief tenure at E. F. Hutton, had to do with the future of cable television.
“I was convinced from the beginning that cable was going to infiltrate society until people had as many channel choices as they could get,” Kagan recalls. E. F. Hutton didn’t agree, and Kagan left to establish his own firm in 1969.
Kagan said that what he does is no mystery: “An analyst is an observer who understands a trend, and spots it and tells everybody what the trend is.”
During the 1980s, Kagan said, “we saw the era of mergers coming” and, he added, most of the companies he recommended rode the crest of buyouts and mergers. Now, he said, “the deal market has been murdered” by tough credit controls instituted in the wake of the savings and loan collapse and the junk bond scandals. But some major exceptions to this trend are in the entertainment industry.
The Time-Warner merger, said Kagan, “cast the die for future conglomerization of media companies. Somebody will buy NBC from GE. Something is going to buy CBS. People will merge with the assets they like.” For example, he said, in light of the impending acquisition of MCA by Matsushita, another natural marriage would be Mitsubishi and Paramount. Because of currency variations, particularly the value of the dollar, “American studios can be bought very cheaply” by foreign companies, Kagan said. “It’s like buying an offshore manufacturing facility.”
Kagan also said he is not overly concerned with the impact of the recession on the cable industry.
Premium services will be affected “because it is a discretionary buy,” but he added that “pay (television) already has been in its own recession for several years.” Basic cable, on the other hand, will be affected very little because “it’s a good entertainment buy, like movies in the Depression--dime-a-ticket escapism.”