Memo To Musk: Use Twitter To Build A Media Conglomerate With Tesla (NASDAQ:TSLA)

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by Jacob Solomon Oct 8, 2022 News
Memo To Musk: Use Twitter To Build A Media Conglomerate With Tesla (NASDAQ:TSLA)

The news is reported by Justin Sullivan.

Introduction

The article is about my thoughts on Musk buying the famous social network after he said he didn't want to, then deciding he did want to. I think it's a fluid situation and I don't know where the situation will end; Musk can be unpredictable.

I wanted to submit this essay because it is in line with my theme of entertainment as a useful business model. It makes sense in this case.

Tesla And Twitter

The CEO ofTesla is buying the company. I was unsure about his pursuit of social media. I think it would be better for him to focus on something else, but I don't have a lot of influence with the board. I have come to the conclusion that Musk may have an opportunity here if he is willing to go a little further.

Creating a media empire based on filmed-entertainment, distribution platforms, and physical media/merchant is what Musk should do.

It sounds crazy, perhaps.

The crazy part is that Musk should be focused on improving his electric-vehicle business model, with the priority being battery storage.

He's not. That's how it is. If he embraces a Hollywood business model that can be included in his portfolio of companies, it will create more value for his overall portfolio and allow him to further the interests of the company. It would have a lot of value.

Musk is a show man. He would like to become a mogul. Everyone has an idea for a movie, and Musk is no exception. He's hosted Saturday Night Live and has appeared in a Disney movie.

By this time, Musk's account has become famous for its pithy commentary. He's always willing to speak his mind. Musk got in some trouble over a desire to take his EV company private, as an example.

If he decided to make movies and other forms of entertainment, it would give him more time to vent in public. He could use social media to promote and distribute his stories.

Bob Iger, who was the leader of the entertainment conglomerate, explored the idea of buying the micro-messaging service. The sports channel's decline in subscribers was being caused by cord-cutting consumers. Disney knew it would eventually need to create a direct-to-consumer platform that could generate recurring monthly revenue and compete with other streamers.

I wasn't in favor of Disney buying Twitter, as I thought it was too expensive for the company, and that money could have been used to bolster Disney's own ecosystems. I always thought that it would be better to make movies and television shows so that it could be more Disney-esque. The key point is that Iger seemed to think that the ability to convert itself into a platform for content distribution was inherent in the service.

It's possible that Musk will finally be the person to see that, given his penchant to not be just one type of CEO: he makes eco-friendly vehicles, he invests in space exploration, he sends satellite trains in the sky to deliver internet access.

A studio that makes filmed entertainment will take some time to get ready. It would be difficult to finance movies and other content via existing cash flow. The 10K from February shows that the net cash from operations in the three years was over a billion dollars. Over one billion dollars was spent on capital in those same years. About $5 billion of long-term debt is held by the social networking site. There is an argument to be made that the current business model is a sell because of declines in free cash flow and a challenging advertising market, even as user activity increases.

There are a lot of opportunities for the company to improve its business fortunes. The current recessionary environment isn't helping, and one might assume that, as we climb out of it, Twitter will be able to adjust its advertising-revenue potential upward and reap cash flow benefits down the line.

If Musk were to pivot the company into a media model, he would have to rely on a group of investors to get things off the ground. As an example, look at Larry Ellison's willingness to commit a billion dollars in a Twitter transaction, as mentioned in an item about the text-message trail.

His wealth is also significant. When the wholeTwitter thing first happened, shareholders were concerned about how it would affect his sales ofTesla shares. We know that he sold $7 billion related to the possible purchase of the social networking site.

If he were to do the filmed-entertainment pivot, it would just be him reallocating his net worth in a diversified manner. A couple years back, Musk and Space X were involved in the development of a Tom Cruise film, which was set in space. I have no idea how far along that film is in the development stage, or how alive it is right now, but it simply goes to show that Space X can be a label/ studio for a Musk media empire.

Musk might be able to get investors to help with the cash-flow issue. Is it possible that he could also buy a film studio?

Those who have read my articles know where I'm going, but they have to admit a smaller-cap type purchase of something like Lions Gate Entertainment would be both economical and useful. Lions Gate would offer immediate access to Hollywood, and considering it's a studio that for some reason has been on the block for too long, perhaps Musk would be insightful enough to give CEO Jon Feltheimer the price he wants. I can't understand why Musk can't buy a studio for a billion dollars.

As a shareholder, I wish Musk would use it less, but he has a large following, and he knows what he can do with it. I think that he has the innovation gene within him, and that he could use it to promote efficient collaboration on content development. It's been done before, most notably with Amazon Studios and their original mandate to create a content slate via an open-submission policy on its own ad hoc social network. It didn't work out for Daisie, an app that tried to do the same thing by using technology to circumvent the filters in L.A. I wonder if it could work with Musk.

Maybe it will. He may be able to do such a task. A novel evolution of the social network would be posting messages that contain pitches and the like, and using artificial-intelligence analysis to identify good ideas.

His idea of the X application might be related to this. Content creation is supposed to be a part of X. Users help to generate content, then help to pay for it through crowd-funding, then use the platform to promote it, and then shop for merchandise associated with it. That is the meaning of X. There is an open question.

Conclusion

I'm thinking about the whole Musk deal. Musk is a business leader who cultivates a celebrity around his image, a mystique to the man that seems to work, when we buyTesla, are we betting on EV models or Musk himself? The latter is the top reason. I tend to emphasize the long-term impact of EV.

He may not be afraid of entering the Hollywood arena. Tech leaders are scared of Hollywood and end up hiring industry insiders to run a content slate. They don't demand commercial content that will sell; instead, they are content with propagating relationships with the people who set up the teams that point the cameras and shoot.

It is a theme I come back to time and time again, and it is an investing theme not only for shareholder portfolios, but for storytellers as well. I wrote a memo about the reasons for being in show business. Both of them are showmen at their core.

The Stock

Those who attempt to profit from short-term price noise trades are the ones who have control of the stock. As a public vehicle, it's a memory.

There is a solid bet on EV on the other side of the coin. The stock is rated poorly on the valuation scale. The annual range of the stock is $200. As of this writing, the price is under $250.

The stock might trend lower in the short term. It looks like this stock is expensive.

There's more to it than that, as it may force more sales on the part of Musk. I have been buying small amounts ofTesla as I add to the position and improve the cost basis. The bear market probably won't go away anytime soon, so if you believe in the long-term future of the company, you should use pullbacks to add to it. The company will do well over time with EV sales, and I think the stock will go up in the future. I've been an owner for a long time.