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20/20 Vision: An Exercise in
Profound Theory
TV Guide was
purchased in l987 by media empire builder Rupert Murdoch for more
than $2 billion. This publication is essentially nothing more
than a well-packaged listing of television program broadcast schedules
- information readily available free to anyone from a number of
sources. Despite this, the purchase price for TV Guide had a market
valuation higher than any one of the major broadcast networks
(CBS, ABC, or NBC) at that time.
Question:
Why would a simple program list be more valuable than an actual
broadcast network?
The Official
Airlines Guide (OAG), a listing of monthly flight schedules, was
sold in l988 for $750 million. OAG simply consolidates flight
information, yet this basic concept created a business with a
greater market value than all but the largest airlines. At the
time, OAG’s purchase price was almost triple the value of
the Eastern Airlines shuttle, about three times what TWA paid
for Ozark Airlines, and only slightly less than the total market
value of USAir.
Question:
Why would a basic list of flights be worth more than an entire
airline?
Quotron Corp.
provides information about security prices to brokerage companies.
Purchased by Citicorp in l986 for $628 million, Quotron did not
posses proprietary access to securities information. It simply
filled a need that brokers hadn’t attended to, by capturing
securities transaction information and recycling it back to the
brokerage industry that had generated the information in the first
place. This created a business with a market value greater than
the prices paid for several leading brokerage houses in the late
l980s, including Paine Webber and Smith Barney.
Question:
Why would a company that simply lists price quotes be worth more
than companies that evaluate those quotes and execute the actual
buy/sell transactions, even when it does not make a profit?
Question:
What profound theory is validated by the above observations?
(Note: There are many more similar examples
to those featured here).
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