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When a Media Guru Talks, People Listen : Trends: Although E.F. Hutton <i> didn’t </i> listen years ago when employee Paul Kagan predicted cable would be big, he is now a renown foreseer of media activity. He’s in Anaheim today.

TIMES STAFF WRITER

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 after stints as a news reporter, editor, sportscaster, advertising executive and financial analyst might be described as pretty classy itself.

From an airy, clock tower building in Carmel, Calif., that Kagan helped design, the 75-member 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, titled “Creating a Stable Environment for System Values.”

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Paul Kagan Associates averages 15 phone calls a day from reporters tracking 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. But E.F. Hutton didn’t agree, and Kagan left to establish his own firm in 1969.

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Don West, the managing editor of Broadcasting magazine who describes himself as a competitor of Kagan, said that for years his publication did not quote Kagan.

“Now we have to quote Kagan,” West said after moderating a panel at the cable conference. “He’s an accepted guru.”

West acknowledged that Kagan “brings to the industry an expertise I don’t possess. I’m not sure how good he is, but he is, in a way, the accepted standard for facts, figures, analyses of the industry. My impression is, he’s very good.”

Praise for Kagan and his firm is not universal, however.

Bob Scherman, editor and publisher of Denver-based Satellite Business News, said, “I never put much credence in his numbers,” adding that generally he finds Kagan’s newsletters “toooptimistic.”

“There’s no question of their success,” Scherman said, but “I’m never certain what their role is, what their purpose is. Are they journalists, stock analysts or what? What is their real function in all this?”

Kagan says 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 predicted would be affected were. Now, he says, “the deal market has been murdered” by tough credit controls instituted in the wake of the S&L; crisis and the junk bond scandals. But some major exceptions to this trend are in the entertainment industry.

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The Times Warner merger, said Kagan, “cast the die for future conglomeration of media companies. Somebody will buy NBC from GE. Something is going to buy CBS. Something is going to happen. They will do it in different combinations. People will merge with the assets they like.”

For example, he said, in light of the acquisition of MCA by Matsushita, another natural marriage would be Mitsubishi and Paramount. Because of currency variations, particularly of the dollar, “American studios can be bought very cheaply” by foreign companies. “It’s like buying an offshore manufacturing facility,” Kagan said.

As for television/cable viewing habits, he said, “I don’t see the (commercial) networks as obsolete,” estimating that declining network viewing will bottom out at about 50%.

Nor is Kagan very concerned about the recession’s impact 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.”

Despite CBS’s disastrous experience with baseball, Kagan said “interest in sports is never-ending.” But he believes that the two comedy channels, despite posturing to the contrary, eventually will have to merge to survive.

Larry Gerbrandt, one of Kagan’s four senior analysts, said that being located in Carmel is no disadvantage to covering the entertainment industry. On the contrary, he said, eliminating commutes and long lunches adds two hours or more to the workday. The only drawback, he said, is that the Carmel cable system has only 36 channels.


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