Welcome to the future and my first contribution to what we believe will be a wonderful website offering self directed investors many opportunities on an ongoing basis.
A great place to start is to make some predictions about the future.
Being in the prediction business is a haphazard occupation, a little bit like trying to round up feral cats on a unicycle. It is my belief that media, as we know, is rapidly careering down a perilous path of no return. Radio, television, newspapers and magazines will never be the same and the reason why they are all seeing their businesses being blown to bits is simple – it is called the internet. The fraudband we have become accustomed to is finally changing and that will have far-reaching consequences for so many businesses the world over.
The ramifications of the changing technology and telecoms world will bestow upon us myriads of opportunities, if we have the courage to seize the day. Spurring investment in our nation’s infrastructure is an effective strategy for getting Australians back to work during an economic downturn, particularly one that is expected to be longer than normal in duration. Although projects to improve the country’s traditional physical infrastructure (for example, roads, bridges, sewer systems) are necessary and important, investments in certain parts of our national information technology (IT) infrastructure – Australia’s digital infrastructure – will have a greater positive impact on jobs, productivity, and innovation. And economic stimulus measures that go to consumption, as opposed to investment, will have a less beneficial impact on productivity and innovation than infrastructure investments.
The future for internet TV may be seen in South Korea. South Korea provides a valuable porthole into a potential broadband future because the nation has had one of the world's highest speed internet networks available to the majority of its population for years. Last year, South Korea's median download speed was 49 Mbps (while the US’s was 2.3 Mbps). Now South Korea is building a nationwide Super Broadband infrastructure which, by 2013, will provide an average speed of 1 Gbps. The project will require 1.3 trillion won (US$935MM) from the government and 32.8 trillion won (US$23BB) from the private sector. The new network is expected to produce 17.7 trillion won of incremental value.
As a result, feature films will be able to be downloaded in one or two seconds (versus 20 minutes to more than an hour in the US, depending on the broadband connection speed).
As the TV and the internet converge, the variety of content will continue to grow exponentially, increasing the need for search engines to navigate it. Program schedules may disappear and the migration of advertising dollars from traditional broadcast TV to the Internet will accelerate, due to better targeting and accountability. Indeed 10 per cent of all advertising dollars are expected to be allocated to the internet this year, up from less than half of one per cent 10 years ago.
In this new world order, investors should be focusing on companies that humans rely on for their existence, we expect that inflation will return and companies will look to increase prices whenever they can, so as to protect and enhance margins in an environment where less is more, but, less will also now cost more, as the abundance of the past few years is longer available.
It is interesting to observe how much emotion can change the temperament of the markets. Recently, we have seen a significant rebound in many of the world’s Stock Exchanges as confidence returns and people realise the end of the world has been averted.
Next week, I will discuss in detail the future of television and what companies to invest in in order to prosper in the new digital economy.
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