This was little noticed in the financial community given that it was a private transaction and the merger was with two companies owned by parent company Alabama Retirement System, but media companies certainly noticed it.

After nearly a decade of broadcast television conglomerates divesting and/or spinning off newspaper assets, a large and respectable TV broadcaster now turned that strategy on its head. Raycom looked at the publishing business more from a news source to be delivered over various platforms, including digital, rather than just a print business. Makes sense, publishers are racing to build unique digital audiences above 100 million to attract national digital advertising. Such a strategy could be applied to television broadcasters as well. This was small market newspapers, however, and not likely to significantly move the needle for digital uniques. So, the question is, will there be more mergers and acquisitions like this and will there be a move toward larger markets, which arguably would have a larger digital footprint? We see the merit in such a merger, but there is a need for skill sets in managing the publishing business, which is still in midst of its digital transformation.

OUTLOOK - TRADITIONAL MEDIA

TELEVISION BROADCASTING
It has been a painfully quiet summer for the broadcast television group, which underperformed the general market and most media segments. In the latest quarter, the Noble TV Broadcast Index declined 5.7%, versus a 4.0% advance by the S&P 500 and modest gains by Publishers and Radio Broadcasters. The year to date performance is upside down as well, with the TV stocks down 8.3% versus a gain by the S&P 500 of 12.5%. We believe that the fundamentals of the industry have been relatively stable to favorable. As such, the weak stock performance, in our view, is largely a function of the lack of M&A activity, which has been muted as companies await the new ownership caps and in-market rules from the FCC. Thank goodness the summer is over! We believe that the TV stocks will have a better performance in the fourth quarter, especially if history is a guide. Typically, the stocks perform best in the fourth quarter in a year prior to the Olympics and an election year. In addition, the stock performance may also be skewed upward due to the expected FCC relaxation of ownership rules, expected by year end, which should once again ignite M&A activity. As such, we are constructive on the TV stocks and encourage investors to Buy near current levels.

RADIO BROADCASTING
The radio stocks under-performed the general market in the third quarter, but were among the top performers in the media sector. The Noble Radio stock index was up 2.7% in the third quarter versus a 4.0% gain for the S&P 500. We believe that the gain in Radio stocks was largely due to an increase in deal volume excluding the mega mergers announced earlier in the year, particularly Entercom and CBS Radio. There were an estimated $124 million in deals in the quarter, up from $116 million in the fourth quarter 2016. A large portion of the deal volume reflected sales of Entercom stations, in an effort to comply with ownership rules to complete the CBS Radio merger. We believe that M&A activity will continue to be strong in radio. In particular, we believe that the prospect of a pre-packaged bankruptcy at Cumulus Media could heighten the potential M&A activity as that company possibly realigns its station portfolio following the potential move. Consequently, we believe that there should be some follow through momentum in the Radio stocks in coming quarters.

PUBLISHING
The Publishing stocks are the highlight so far this year, up a strong 15.6%, outperforming the general market as measured by the S&P 500 which is up 12.5% year to date. The Publishing stocks had more modest gains in the third quarter, up 1.4%, but still better than many media sectors. In our view, the stocks were favorably influenced by tronc's purchase of the New York Daily News and the merger between the Community Newspaper group and Raycom's broadcast TV stations, mentioned earlier in this newsletter. We believe that the Publishers have honed a digital strategy that focuses on building beyond 100 million unique visitors, a threshold needed to attract digital advertisers. Consequently, we believe that there will continue to be consolidation in Publishing to add scale to digital initiatives. However, investors are clearly focused on Publishers with more conservative balance sheets that would be more likely to participate in industry consolidation.

OUTLOOK - INTERNET AND DIGITAL MEDIA

INTERNET & DIGITAL MEDIA
For the last few years there has been talk that consolidation in the advertising technology sector was needed for a variety of reasons: 1) too much capital had been raised to finance too many "point solution" companies; 2) brands, agencies and publishers all want to reduce the number of middlemen/vendors they work with; 3) capital to the sector had dried up (particularly after multiples for publicly traded companies fell to levels that were far lower than private market multiples), prompting a need to focus on profitability; and 4) the need for scale to compete against the likes of Google and Facebook.

While there has been a steady level of M&A activity in recent years, 3Q 2017 was notable in two respects: 1) several publicly traded companies were active; and 2) private equity firms, which historically sat on the sidelines when it comes to ad tech, began acquiring companies in the sector. For example, publicly traded companies such as Maxpoint Interactive (MXPT), Rocket Fuel (FUEL) and Yume (YUME) agreed to be sold during the third quarter, while Cogint (COGT) agreed to merge its lead generation business, Fluent, with Chinese firm Blue Focus. Yume, a video DSP company agreed to sell to RhythmOne, for $185M. RhythmOne, formerly known as Blinkx, has been very acquisitive in recent months, having acquired Perk for $42M in January and certain assets of RadiumOne for $26M in June. Telaria (TLRA; formerly known as Tremor Video) was also active, as it agreed to sell its video DSP business, previously known as ScanScout, to another publicly traded ad tech firm, Israeli based Taptica (AIM: TAP), for $50M.

Private equity firms were also active: Maxpoint sold to shopper marketing firm Valassis, a portfolio company of Harland Clarke for $121M. Rocket Fuel was acquired by ad serving company Sizmek, a portfolio company of Vector Capital, for $210M. GTCR entered the ad tech space with its purchase of a majority stake in Simplifi, a search advertising retargeting company and DSP. Finally, Providence Equity Partners entered the sector with its purchase of ad verification company DoubleVerify.