Whether or not that’s true is certainly arguable. What is not arguable is that usage-based pricing is better for cable operators and for wireless carriers. Comcast Corp. (NASDAQ: CMCSA) last week said that it planned to drop its 250-gigabyte data plan and introduce a new pricing scheme that would allow its customers to consume 300 gigabytes of data at a base rate and pay $10 for each 50 gigabytes customers use above that limit. The usage-based plan could squeeze streaming video providers like Netflix Inc. (NASDAQ: NFLX) that have built their entire business models on essentially unlimited bandwidth. Streaming a 2-hour movie in HD consumes about 4 gigabytes.

It’s probably only a matter of time before other cable providers like Time Warner Cable Inc. (NYSE: TWC) and Cablevision Corp. (NYSE: CVC) adopt similar plans. Wireless carriers AT&T Inc. (NYSE: T) and Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), appear set to announce shared data plans that will allow more than one device to share usage on a single data plan. The carriers already charge more for usage above the plan limit.

Genachowski appears to believe that usage-based plans will level the playing field between the cable operators and the wireless carriers. Time Warner Cable experimented with a usage-based plan in 2009, but decided not to adopt the plan because customers hated it. Customers will still hate the plans, but without FCC backing customers no longer have any heavyweight help.

Comcast and the other cable companies will argue that the 300-gigabyte limit affects a small number of very high usage customers. They will also argue that by adopting a usage-based plan the vast majority of customers will pay less. But the data plan will also include internet access from computers, smartphones, and tablets, as well as Wi-Fi access from the local coffee shop.

Comcast has not yet announced pricing for its usage-based plan, but the odds of prices actually dropping don’t seem particularly good. Especially because the company is throwing in another 50-gigabytes of usage.

Cable companies need to prevent customers from “cutting the cord” and choosing to use their wireless data plans to drive home entertainment. An Internet TV box that really works is their biggest nightmare.

But if the cable guys and the wireless carriers can grab enough wireless spectrum and do enough cross-licensing deals and keep the content creators happy, the cost to consumers will not fall. The cable and wireless industries will appear to be competitive, but they’ll really operate an oligopoly and some small carriers and cable companies will be allowed to stick around to make things look good by providing service to low density markets. If the FCC really wants competition in the wireless business, then the agency better stick up for consumers, not cable or wireless providers.

Paul Ausick

Wanda is transforming into a global cinema chain owner with this now culminating two of the world’s largest movie markets.  Wanda is private and most recently had more than $16 billion in annual sales from its commercial development and entertainment operations.  It currently owns some 86 theaters in China which was a total of about 730 movie screens.

So, here is Wanda is getting: 346 multiplex theaters located mostly in North America and a total of just over 5,000 movie screens.  This comes to a value of almost $517,000 per screen or just over $7.5 million per theater on average.

Cinemark Holdings Inc. (NYSE: CNK) operates 459 theatres with 5,181 screens in the United States and in the Americas.  It has a market value today of $2.6 billion and shares are up almost 1% at $23.09 against a 52-week range of $17.10 to $24.45.  That value is roughly the same as the AMC deal today.  The value here is almost $502,000 per screen or just over $5.65 million per screen.

Regal Entertainment Group (NYSE: RGC) recently said that is the largest and most geographically diverse theatre circuit in the United States: 6,580 screens in 522 theatres in 37 states and D.C. as of April 26, 2012.  Shares are up 3.3% at $14.04 against a 52-week range of $11.15 to $14.74 and its market value is listed as $2.16 billion as of now. This value is about $328,000 per screen and about $4.13 million per theater.

Carmike Cinemas Inc. (NASDAQ: CKEC) is the baby of the group with a market value of only $262 million.  As of December 31, 2011, it owned, operated, or had an interest in 237 theatres with 2,254 screens located in 35 states. Shares are up 3.4% at $14.79 against a 52-week range of $5.14 to $15.80.  The value here is down at about $116,000 per screen or about %1.1 million per theater.

Whether or not this drives up the price of feature films will only be known through time, and that may depend upon the movie studios more than the actual theaters.  Still, the value of movie screens and movie theaters just went up.

Not bad considering that the lion share of profits for theaters come from selling popcorn, food, fountain drinks, and candy.

JON C. OGG

But a CEO wedding announcement on the following day? The answer that new shareholders should be concerned with is simple: “You knew you had a founding CEO who was able to do whatever he wants, even though he is now playing with your money. Now you know he WILL do whatever he wants whenever he wants.”

Magically announcing a wedding at what was supposed to be a graduation party is one thing. But within a day of an IPO of this magnitude? Shareholders now have every reason to be concerned. Oh, and by the way, if you do not like it your only way to make a statement is to sell your shares. You have no vote in the company at all because Zuckerberg has well over 50% of the share votes either under ownership or under control.

It is hard to imagine that Zuck would go take a three-week honeymoon, but he could do that at some point and the poor Facebook shareholders would just have to sit there and take it. Again, your only vote as a shareholder is to sell your shares. Even then, do you think a guy now worth $20 billion or so really cares?

We warned you that there were 18 big risks in chasing Facebook ahead of the IPO, and all of these risks are still present. We never thought that there were two more: 19) CEO decides to distract himself with his own marriage status as just a small deal, and 20) CEO could go take a long vacation/honeymoon immediately.

Who knows what Zuckerberg’s living situation will be now and who knows if he and his now-wife will decide to go take a great vacation and honeymoon. I would if I was in his shoes, at some point, but not the weekend after an IPO. Shareholders should care what this means, but they better remember over and over that they were warned about the corporate governance here as a controlled entity (over and over, and over).

As of 6:50 PM EST on Sunday night there have been “853,293 people like this” on Zuckerberg’s Facebook status page. If any of those people are shareholders liking this, well let’s just say that they have a conflict of interest over “liking” their own money.

Barron’s wrote about the new downside risks about Facebook shares falling if underwriters choose not to support the IPO like they did on Friday at the $38.00 share price. That was without considering the CEO would sneak out and get married the same weekend.

JON C. OGG

Trading was halted after Zynga’s shares fell by -10%, then were briefly reopened before being stopped again.

Shares are now trading once more, down about -5.7% at $7.80 after posting a new 52-week low of $7.08. The previous 52-week range was $7.34-$15.91.

Compared with the same period a year ago, total sales were down -12.2% and comparable store sales were down -12.5%. In its earnings report the company said:

Despite slower store traffic during the quarter, we achieved our earnings target due primarily to gross margin expansion and positive profit contributions from our pre-owned, mobile and digital businesses. We expect those segments to fill the profitability gap as we transition to the new console cycle.

The company’s revenues were lower in all of its categories, but profits were higher in two of the four, with new hardware and new software profits falling year-over-year. The company’s “Other” category, which includes digital and mobile businesses, grew 23%. Mobile contributed $12 million in quarterly revenue and GameStop said that amount is on target for the company to reach $150-$200 million in mobile sales for 2012. All the company’s hopes are tied up in a big holiday season.

The company’s forecast will devour the share price today. GameStop forecast second quarter sales down -11% to -5% and EPS of $0.10-$0.18. The consensus EPS estimate had been $0.26, less than half this quarter’s EPS. The company maintained its full-year EPS guidance of $3.10-$3.30, with the consensus analyst estimate of $3.20 right in the middle.

GameStop will need a miracle to reach those numbers. By the company’s own plan it will be less than a third of the way to its EPS target at the end of the first half of the fiscal year. Even if the company equals last year’s EPS for the second half of the year, it will still fall way short of the current guidance.

Shares are down -9.2% at $18.92 in the first twenty minutes of trading this morning. The stock’s 52-week range is $18.34-$28.66.

Paul Ausick

News came on Thursday morning that Berkshire Hathaway Inc. (NYSE: BRK-B) (NYSE: BRK-A) has reached a deal with Media General, Inc. (NYSE: MEG) to buy all of Media General’s newspapers outside of the Tampa paper.  Buffett is joining a sector that has wrecked many private equity firms looking for deals over the last decade in printed news.  The price tag is listed as $142 million in cash, but Berkshire Hathaway will simultaneously issue a $400 million term loan and a $45 million revolving credit line.

Today’s news is likely to bring a focus on other newspaper outfits around the nation.  Some companies with high concentrations in newspapers are Gannett Co., Inc. (NYSE: GCI), The McClatchy Company (NYSE: MNI), Daily Journal Corp. (NASDAQ: DJCO), A. H. Belo Corporation (NYSE: BLC), Lee Enterprises Inc. (NYSE: LEE).

Berkshire Hathaway also owns 1.7 million shares of The Washington Post Company (NYSE: WPO), although Warren Buffett does not hold a board seat any longer.  Does it beg the question, “Does this increase or decrease the value of The New York Times Company (NYSE: NYT)?”…

Media General will also issue Berkshire Hathaway ‘penny warrants’ for approximately 4.6 million Class A shares and that will give Buffett the right to buy 19.9% of Media General’s existing shares outstanding. Berkshire Hathaway also has the option to nominate a director to Media General’s board of directors.

The newspaper sale includes websites and mobile applications and these outfits have commercial printing businesses as well.  These include 63 daily and weekly titles in Virginia, North Carolina, South Carolina and Alabama.

Dare we say Buffett is back to his paper route he had as a teenager?  Mr. Buffett said, “In towns and cities where there is a strong sense of community, there is no more important institution than the local paper.  The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”

The move will allow Media General to focus on the broadcast television business, which accounted for some 77% of its 2011 platform cash flow in 2011.

Media General closed at $3.14 on Wednesday and its 52-week range is $1.14 to $6.84.  Its shares are indicated up about 40% around $4.75 in early indications.  With this newspaper and media outfit up so much, it may be safe to expect that other newspaper outfits could be worth more money than their battered shares indicate.

JON C. OGG

We noted last week that there are other companies with ties to Facebook, including Microsoft Corp. (NASDAQ: MSFT), GSV Capital Corp. (NASDAQ: GSVC), and First Hand Technology Value Fund Inc. (NASDAQ: SVVC) which already own shares in Facebook, and Global X Social Media Index ETF (NASDAQ: SOCL) which will have to acquire shares as soon as it can after the IPO.

But Zynga gets the most bounce because Microsoft’s holdings are not large enough to give the software giant a big boost. The others are straight financial plays which may turn out well for investors or may not. So Znyga gets the focus.

Somehow, though, it’s hard to figure how Facebook’s being a public company helps Zynga’s revenues or profits much. Are more people going to become Facebook users once the company is publicly traded? Will Zynga raise its prices? Will Facebook pay Zynga more? Sure Zynga’s CEO stands to make some money with his sale of Facebook shares, but how does that help his company?

The one thing Zynga continues to have, and that it has had for some time, is a popular for-fun casino that could easily be switched over to a gambling model if the US Congress ever approves such a law. But, again, how exactly is that tied to Facebook’s status as a publicly traded company? And when Zynga’s deal with Facebook expires, who’s in the driver’s seat in negotiations for a future deal?

Plenty of people think there’s something there, because Zynga’s shares are up 7.9% shortly after noon today, at $8.57 in a 52-week range of $7.34-$15.91. Shares were up nearly 11% at one point this morning.

Paul Ausick

Most investors and watchers are focused on how large Facebook is and how big its opportunities are in the future.  There may be a side of caution with a super-premium valuation at the IPO here.  24/7 Wall St. wants to at least run up some of the less obvious flags of caution which investors should at least consider on the risk side before throwing their life savings into the social networking leader.

Leadership is a huge risk here… Facebook is effectively going to be controlled by 28-year old Mark Zuckerberg.  He will hold or have the ability to control approximately 57% of the voting power of the outstanding capital stock following this offering.  The fact that Zuckerberg’s ‘hoodie’ stood out in the IPO roadshow more than anything else may bring some caution.  Zuckerberg also apparently gets to appoint a successor, making this somewhat like a kingdom rather than a public company.

NO real voting power for holders… Facebook has this dual-class of shares.  This gives what is effectively zero power to common shareholders. Shares of the Class A common stock are entitled to one vote per share while shares of Class B common stock are entitled to ten votes per share.  This is another example of a public company that might as well not even hold annual shareholder meetings.

Google hype versus Facebook hype… The last big frenzy of this sort that comes to mind is Google Inc. (NASDAQ: GOOG).  Facebook will already be worth half of what Google is worth today, yet Google is expected to generate almost $35.5 billion in sales in 2012.  If you just annualize the first quarter Facebook revenues with 10% growth sequentially in each quarter, the Facebook revenues would come to about $4.9 billion in 2012.

Sequential revenue growth has already faltered… We just noted the revenue path if Facebook grows revenues 10% sequentially each quarter, but the reality is that in the first quarter of 2012 the social media giant saw negative sequential revenue trends.  Facebook generated revenues of $1.06 billion versus $731 million a year earlier and net income attributable to shareholders was listed as $137 million versus $153 million.  Facebook saw its first sequential decline in revenues as the fourth quarter of 2011 had combined revenues of $1.131 billion.  Despite seasonality, the growth opportunity here is so large that the company should still be growing sequentially at this point.

Filed under: Accounting, Compensation, Corporate Governance, Editor's Picks, Entertainment, Internet, IPOs, Media, Shareholder Issues Tagged: FB, featured, GOOG, MSFT, ZNGA ]]>