Portfolio Creation: / /

Analysis of Economic and Non-economic Factors in Three Media Companies

Basic Information
Investment Trust Co., Ltd. Issues in Mass Communication Management
CEO of Investment Trust Augie Grant
Investor Tsun-Ming Wang
Funds USD $100,000
Duration 9/14/2021~11/23/2021
Company Type Media
Target Company Facebook, Disney, and Netflix
Length of Report 2651 words
Table 1: The basic information about the portfolio.

Purpose
The following information explains why Tsun-Ming wants to invest in
Facebook, Disney, and Netflix. The report includes three dimensions: the core
business of the company; the economic factors that prompted Tsun-Ming's decision;
the non-economic factors that impact the company. The portfolio also provides a
spreadsheet that shows the current prices and shares that Tsun-Ming has invested in.

Tsun-Ming's Preference
Facebook, Disney, and Netflix are three media companies whose services Tsun-
Ming uses every day. Tsun-Ming usually checks his Facebook messages (including
friends' texts and notifications from Campus and Marketplace) when he wakes up at 7
am. After he returns from school at 7 pm, he turns on Netflix on his laptop and
watches the series "Stranger Things" produced by Netflix. Before going to bed, he
plays the Podcast "Disney Stories For Kids" to learn English until he falls asleep.
According to Tsun-Ming's routine life, making a portfolio of these three media
companies that Tsun-Ming trusts allowed him to feel at ease.

1
 Core Business

Facebook, founded in 2004 by Mark Zuckerberg, Eduardo Saverin, Dustin

Moskovitz, and Chris Hughes, provides free online social networking services. The
company's headquarters are in Menlo Park, California. In 2012, Facebook became the
largest social network, with more than one billion users; at that time, about five
hundred million people were using Facebook every day (Hall, n.d.). Facebook has 30
diverse functions (presented in figure 1). As Tsun-Ming is a student in UofSC, he
usually uses the "Campus" function to keep track of campus news.

Figure1: The functions of Facebook.

Facebook is still gaining users. The number of monthly active Facebook users
was approximately 2.895 billion in July of 2021 (Facebook - Home, 2021). Facebook
has grown its role in the media world by buying companies. The three biggest
disclosed Facebook acquisitions are WhatsApp ($19 billion), Oculus V.R.
($2 billion), and Instagram ($1 billion) (Hallman, 2020). The core business is
presented in table 2.

2
 Product Description
Facebook enables people to connect on mobile devices and PCs.
Facebook Users also can interact with people and build a community on
Facebook.
Instagram allows users to express themselves through photos,
videos, and messages bringing users closer to the people and things
Instagram
they like. Instagram also lets users connect and shop with their
favorite businesses and creators.
Messenger lets people connect with others through chat, video, and
Messenger
Rooms.
WhatsApp is a messaging application that makes users
WhatsApp
communicate and transact privately.
Facebook Facebook Reality Labs' uses virtual reality products to help people
Reality Labs feel connected to the outside world.
Table 2: Products of Facebook (Form 10-K Facebook Inc, 2021).

3
 Walt Disney Company was founded in 1929 by Walter Elias Disney. The
company's headquarters are in Burbank, California. Walt Disney Productions is one
of the world's largest media conglomerates and is known for family entertainment
(Disney Company | Overview, History, & Films, n.d.). The three most significant
Disney acquisitions are 21st Century Fox ($71 billion), ABC ($19 billion), Pixar
Animation Studios ($7.4 billion); the other famous acquisitions are Marvel and
Lucasfilm (Johnston, 2021). Disney is a diversified entertainment company that
operates entertainment, including streaming video, news, music, amusement parks,
cruises, and resorts. Investor Tsun-Ming has been to Disney World in Florida; he had
an excellent experience out there.

To elaborate on Disney's business, the following table 3 below shows the

description of Disney's business (Form 10-K Disney Inc, 2021).
Main Segments Description
Domestic TV network (ABC, Disney, ESPN,
Freeform, FX, and National Geographic).
Linear Networks International TV network (Disney, ESPN, Fox,
National Geographic, and Star). A 50% equity
investment in A+E Television Networks.
DMED

Disney+, Disney+Hotstar, ESPN+, Hulu, and

Direct-to-Consumer
Star+ DTC streaming services.
Sale content to third-party television and
subscription video-on-demand services. Staging
Content Sales/Licensing
and licensing of live entertainment events on
and Other
stage plays. Distribution of theatrical, home
entertainment, and music.
DPEP

The Parks, Experiences, Post-production services and 30% ownership

and Products interest in Tata Sky Limited.

Table 3: The important events of Disney.

4
 Netflix, Inc. was founded in 1997 by Reed Hastings and Marc Randolph. The
company's headquarters are in Los Gatos, California. Netflix's core businesses are
media-streaming, video-rental, and the creation of original programming. The
streaming revenue of Netflix breaks into four parts: the United States and Canada
(UCAN); Europe, Middle East, and Africa (EMEA); Latin America (LATAM); and
Asia-Pacific (APAC) (Form 10-K Netflix Inc., 2020).

Figure 2 shows the Netflix's subscribers sharply gain 100 million in three years
from 2016 to 2020 (Form 10-K Netflix Inc., 2020).

Figure 2: The change of Netflix subscriptions.

250

203.66
200
167.09

150 139.25

110.64

100 89.09

50

0
2016 2017 2018 2019 2020

(million)

5
 Economic Factors

Facebook is the 6th largest market cap company in the world, the market cap of
Facebook is up to $1.07 trillion (CorporateInformation, n.d.). Facebook makes lots of
revenue from selling advertising to marketers. In fiscal year (FY) 2020, Facebook
posted $84.2 billion in advertising revenue, and the advertising revenue accounted for
98% of the company's total revenue (United States Securities And Exchange
Commission, 2021a). Facebook also posted $25.43 billion in advertising revenue in
Q1 FY 2021 (United States Securities And Exchange Commission, 2021b).
Facebook's annual net income had also increased last year. Figure 3 shows Facebook's
net income from 2016-2020 (United States Securities And Exchange Commission,
2021a). Figure 3 tells Facebook could even earn money during the pandemic year.
Figure 3: Facebook's net income from 2016-2020.
35
29.146
30
25 22.112
18.485
20 15.934
15
10.217
10
5
0
2016 2017 2018 2019 2020
(billion)
The following table 4 is sourced from TradingView (TradingView, n.d.-a),
shows the important events of Facebook in 2021.
Date Event Description Price/share

Eyewear Facebook brings its first smart glasses to the

9/9 $378
invention market by teams up with Ray-Ban.
Facebook-owned WhatsApp faced a $267
$382.18
9/5 Fined million fine for breaching European General
(9/7)
Data Protection Regulation rules.
Forced to sell The U.K. launched an investigation and may $366.56
8/15
the company soon force Facebook to sell GIF-maker Giphy. (8/16)

6
 The second-quarter earnings and reports a
Second-quarter record $29 billion in revenue, but the CFO of
7/29 $358.32
earnings Facebook concerns that a slowdown is on the
way.
Diem is getting a revamp after focusing its
5/13 Digital currency $305.26
efforts on addressing U.S. regulator's concerns.
A new Instagram service for kids was opposed
5/11 Push back by Attorney Generals from 44, pushing the $306.53
stock down by more than 4%.
First-quarter Facebook's revenue rose 48 percent, driven in
4/27 $303.57
earnings large part by advertising.
Plans on Facebook has announced plans to help with the $273.75
3/14
COVID-19 rollout of COVID-19 vaccines. (3/15)
Facebook filed to dismiss "illegally
Filed to dismiss maintaining its social networking monopoly
3/9 $265.74
the laws through a years-long course of anticompetitive
conduct."
Facebook argues with the Australian
2/16 Argument $273.97
government about news laws.
Facebook has decided to suspend U.S.
Banned the President Donald Trump's Facebook and
1/6 $263.31
president Instagram accounts following the incident on
Capitol Hill.
Table 4: The important events of Facebook.

The share price of Facebook has been growing from $263 to $378 this year; the
amount of increase was up to almost 38%. The highest price reached $384.33 on
September 1 this year. It seems the negative events didn't hit the share price. The
"Ray-Ban Stories Smart Glasses" unveiled by Facebook allows the wearer to record
the video, listen to music, and answer the phone with one click. As Tsun-Ming is a
Vlog filmmaker, he is looking forward to having smart glasses. Facebook is selling
the advertising to marketers and creating the technical product to show Facebook's
technological prowess.
7
 Disney is ranked 27th market cap company in the world; the market cap of
Disney is up to 0.32 trillion (CorporateInformation, n.d.). Disney's two primary
business segments are Disney Media and Entertainment Distribution (DMED) and
Disney Parks, Experiences, and Products (DPEP). The following table 5 presents the
revenue and its percentage in different segments in Q1 FY 2021 (United States
Securities And Exchange Commission, 2021c).
Main Segments Revenue Proportion
Linear Networks $7.7 billion 47%
DMED Direct-to-Consumer $3.5 billion 21%
Content Sales/Licensing and Other $1.7 billion 10%
DPEP The Parks, Experiences, and Products $3.6 billion 22%
Total Revenue in Q1 FY 2021 $16.5 billion 100%
Table 5: Disney's business segments and its revenue in Q1 FY 2021.

Tsun-Ming still has faith in The Walt Disney Company. Figure 4 shows Disney's
net income from 2016-2020 (United States Securities And Exchange Commission,
2021d). Although Disney lost money last year, the subscriptions of Disney+ are still
growing.
Figure 4: Disney's net income from 2016-2020.

14 12.598
12 10.425
9.391 8.98
10
8
6
4
2
0
-2 2016 2017 2018 2019 2020
-4 -2.832 (billion)

The following table 6 shows the important events of Disney in 2021. The share
price of Disney rose $66.44 (3.8%) from $177.68 dollars at the start of the year to
$184.12 dollars today. Disney doesn't seem to have any big news this year to spur
investors to invest. But only within one year, subscribers of Disney+ boosted 56
million people from August 2020 to August 2021 (The Walt Disney Company, 2021).
8
 Date Event Description Price/share
Number of Disney+ reaches 116 million subscribers
8/12 $179.29
subscribers (Barnes, 2021).
Disney reported third-quarter earnings that beat
Financial
8/12 estimates on both revenue and profit $179.29
results
(TradingView, n.d.-b).
The media company reported second-quarter
Financial earnings that missed expectations. Disney
5/12 $177.85
results reported earnings per share of 79 cents on
revenue of $15.61 billion (TradingView, n.d.-b).
Table 6: The important events of Disney.

9
 Netflix is ranked 32nd market cap company globally; the market cap of Netflix is
up to 0.26 trillion (CorporateInformation, n.d.). The primary revenue of Netflix is
streaming. In FY 2020, Netflix posted $24.75 billion in streaming revenue and $0.23
billion in DVD revenues (Form 10-K Netflix Inc., 2020). Netflix doesn't sell
advertising space and user data; Netflix's revenue source is subscriptions (Reiff,
2021). The monthly costs of subscriptions are basic ($8.99), standard ($13.99), and
premium ($17.99). Table 7 shows the change of subscriptions during these five years
(United States Securities And Exchange Commission, 2020e). Figure 4 shows
Netflix's net income from 2016-2020 (United States Securities And Exchange
Commission, 2021e). Figure 5 tells that Netflix is not only gaining subscribers but
also net income. Since the pandemic is not over yet, the number of people using the
Internet to watch films is expected to increase.
Figure 5: Netflix's net income from 2016-2020.
3 2.7614

2.5
1.8669
2
1.5 1.2112
1
0.5589
0.5 0.1867
0
2016 2017 2018 2019 2020
(billion)
The following table 7 shows the important events of Netflix in 2021 showing on
TradingView (TradingView, n.d.-c).
Date Event Description Price/share
Earnings per share of $2.97 versus analyst
Fall short of expectations of $3.16. Revenue was $7.34
7/21 $513.63
expectations billion, versus analysts' expectations of $7.32
billion. Shares of Netflix fell 3.28%.
Netflix shares fell back after the company
Subscriber
4/20 reported a significant slowdown in subscriber $549.58
slowdown
numbers.
Table 7: The important events of Netflix.

10
 Non-economic Factors

The portfolio uses Google Trends to find out the non-economic news from
January 1 to September 14, trying to point out those highly discussed articles could
have a good or bad impact on the company or not. Besides, the Facebook portfolio
also mentions some news that can impact the company, but haven' had highly
discussed.

Figure 6: Facebook's interest over time (Interest over Time, 2021a).

1/23 4/4 6/20 7/5

○ ○ ○
9/6
○ ○

1. 9/10: Academic false

Facebook made significant errors in the data is provided to researchers, harming
academic work (Timberg, 2021). Due to Facebook being the most prominent
social company globally, it is an essential subject for scholars to study the
behavior and psychology of its users. Once Facebook has lots of data about its
users, it has the authority to explain how the users use it. Since Facebook
submitted the wrong data to researchers, it will persecute a whole stream of
academic research and make a bad reputation of itself.

2. 9/6: Technology false

Facebook has apologized for an "unacceptable error" after its AI systems asked if
folks wanted to view more content on "primates" (Quach, 2021). The
disrespectful behavior from the Facebook AI system could lose the users of black
people.

11
3. 7/14: Advertising threat
Branch suggested that only 25% of Facebook users opt for tracking; iPhone users
can opt out of cross-site and cross-app tracking (Miller, 2021). If the Facebook
users turn off the cross-site or cross-app behavior tracking, the advertisers won't
be able to track the actual preference of users. Facebook advertisers will have a
hard time placing ads, and it might impact the number of advertisers to place ads
on Facebook. Facebook said it could no longer provide advertisers with specific
metrics to help them know whether their ads were working (Miller, 2021).

4. 7/5: Policy threat

In May, Hong Kong's Constitutional and Mainland Affairs Bureau proposed
changes to the city's data protection laws, saying they were needed to combat
doxing (Purnell, 2021). Hong Kong's freedoms are slowly being exploited. It
may lead to the number of users slowing down.

5. 6/20: New feature

Facebook has officially rolled out its new live audio rooms and podcast
(Hutchinson, 2021). The new feature allows more users to stick to Facebook and
draw attention back from the Clubhouse.

6. 4/4: Privacy issues

Facebook data on more than 500 million accounts was found online (The
Associated Press, 2021). This issue will again hurt users' trust.

7. 1/23: System error

Many people found themselves logged out of their apps Friday night (Guynn &
Tyko, 2021). If the system frequently fails, users will think their Facebook
account has been hacked. This system error will hurt users' trust in the company.

12
 Figure 7: Disney's interest over time (Interest over Time, 2021b).

○3/6 ○7/10 9/5

○

1. 9/5: Price changes

On October 8, the subscription fee of Hulu will raise a dollar. The reason for the
increase in Disney's decision to add thousands of Bollywood titles and Hotstar
originals to the platform (Hayes, 2021). If the price change is reasonable, the
user will be more receptive to the price adjustment.

2. 7/10: Political correctness

Disney has a new Jungle Cruise look at its theme parks, and they did away with
all racist robots (Staff, 2021). Disneyland should be safe and educational,
especially for children.

3. 3/6: Diverse characters

"San Diego's Kelly Marie Tran" is Disney's first Southeast Asian princess (Garin,
2021). Disney creates ethnically diverse characters that can appeal to people of
different races in the world.

13
 Figure 8: Netflix's interest over time (Interest over Time, 2021c).

○ 1/31 5/16 8/22

○ ○

1. 8/22: Best movie in years

"The Chair" Is Netflix's Best Drama in Years (Gilbert, 2021). The best movie
during the years can reflect the preference of the audience.

2. 5/16: Competitors
AT&T and Discovery may combine content to combat Disney+ and Netflix
(Fingas, 2021). If AT&T and Discovery merge content, it could be a powerful
medium for fiction and nonfiction movies. It could be a competitor to Netflix.

3. 1/31: One Advantage Over Netflix

Streaming inevitably consolidates into cable-like packages, in which sports play
an increasingly important role (Shaw, 2021). As a result, current sports events
cannot be replaced by Netflix.

14
 Spreadsheet of Funds

The following table 8 shows the investment that Tsun-Ming has invested in, and
figure 9 shows the proportion of the investment. Tsun-Ming made this investment
according to the market cap, revenue, and news of the three companies. He believed
that companies with good market cap, revenue, and news would build an excellent
reputation. Facebook is the largest media company by market cap and has a lot of
positive news, so Tsun-Ming allocated 40% of the funds. Tsun-Ming didn't use more
than 50 % of the funds to invest just in one company because he wanted to spread the
risk.
Date Company Symbol Price/share # of Shares Investment Proportion
9/14/2021 Facebook FB $376.53 106 $39,912.18 40.00%
9/14/2021 Disney DIS $182.40 192 $35,020.80 35.10%
9/14/2021 Netflix NFLX $577.76 43 $24,843.68 24.90%

TOTAL $99,776.66
Table 8: The spreadsheet of investment.

Figure 9: Proportion of investment.

$24,844

$39,913

$35,021

15
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19
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20