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Media Wall Street Report 9-16-11: Nielsen, Amazon, Murdoch, McGraw-Hill, Google

September 16, 2011
Jack Myers

Published: September 16, 2011 at 11:42 PM GMT
Last Updated: September 16, 2011 at 11:42 PM GMT

With all the ongoing activity in the media space, this week proved to be good timing for research firm Nielsen (NLSN) to host an analyst meeting to explain the firm's new sales/service strategy. The firm has hired big name consultants from McKinsey, assigned them to global accounts, and will compensate them on client satisfaction. Needham's Laura Martin likes this strategy and believes it strengthens the firm's access to the C-Suite.

Bucking the trend of the recent spate of acquisitions in the media space, McGraw-Hill (MHP) appears ready to acquiesce to pressure from some large hedge fund shareholders and split itself into two companies. The result would be the clear separation of its educational franchise from everything else market-related (S&P, Platt's J.D. Power, etc.). The family-run business has taken quite a beating from its S&P unit's involvement in the subprime crisis and current CEO Terry McGraw III wants to step aside and unlock the value in the business founded by his grandfather in 1888.

While the extreme summer heat seems to be tapering off over much of the U.S., shareholders are turning up new heat on News Corp.'s (NWSA) management. According to the Financial Times, James Murdoch, the firm's deputy COO and son of founder Rupert, was recalled to a UK parliamentary committee to address accusations that he may have misled MPs. Thousands of new documents surfaced relating to the phone-hacking scandal embroiling the firm. In spite of the controversy, Nomura is standing by its top idea for 2011. Citing low valuation, fast-growing cable networks, and the benefits of the planned BSkyB merger, analyst Mike Nathanson thinks News Corp. is an even more attractive investment than before.

Amazon (AMZN) continues to push on the global growth button, and this week saw the launch of its 9th global site with a version tailored for Spain. Not content with one major news item for the week, word quickly leaked that an Amazon tablet was on its way to market. While investors got excited over news that Amazon would introduce a tablet version of its popular Kindle e-book reader, Barclays's reception to news of the device was a bit more tepid. Interested with the opportunity yet afraid, Amazon might be overreaching, analyst Anthony DiClemente took a wait-and-see approach to Amazon's depressed margins that accompany the prolonged investment cycle the Internet's biggest store is taking.

Strong smartphone adoption continues, especially in the Online Travel Agency space (OTA), but Nomura's Brian Nowak is suspect of where this incremental time and money is coming from. Consumers are checking out and checking in via travel apps and Foursquare, but it appears that these trends come at the expense of desktop usage. OTA's need to look elsewhere for their next leg of growth.

None of this has been lost on Google (GOOG), which finally launched Google Flight Search this week after the search firm acquired the technology from its M&A with ITA. The New York Times does a good job comparing Google Flight to the popular Kayak service.

While users can search multiple airlines and booking options for domestic flights through Google's new tool, Barclay's analyst Ronald Josey is disappointed the booking options are limited to direct air supplier sites only.

While Google's entry probably makes things tougher on incumbents like Orbitz (OWW) and Expedia (EXPE) as online air travel becomes even more commoditized, Barclays thinks Priceline (PCLN) is still the best positioned to leverage global travel trends.

It may only be September but online retailers already have an eye on the holiday spending season and it looks to be a doozy. EMarketer looks at a report published by MasterCard Advisors' "Spending Pulse" expecting retail sales growth to hit double digits (14%) this holiday season.

Holiday time is the most exciting part of the year in the media business. It's already not disappointing investors in the space.

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