SDME Chapter 3: What’s a Company Worth?

The market valuation of any media company is determined by both external and internal factors. External factors – such as the economic environment and industry sector in which a company operates – have historically exerted an outsized impact. However, decisions made by managers of a media enterprise can make a big difference in the financial performance and valuation of both a start-up or legacy news organization. There are a number of tools used to place a valuation on both private and publicly traded companies. Whether you are a shareholder in a publicly traded company or the founder of a digital start-up, you will calculate return on investment using the same financial tools. Those tools allow you to adjust profit and cash flow to account for opportunity costs and the time value of money. Here are the questions you’ll consider in this chapter:

• • What are the factors that affect the value of a company?
  • How do investors determine a media company’s valuation?
  • Who are today’s media investors and what sort of return on investment are they seeking?
  • How do you measure return on investment (ROI)?