Simeon McMillan
Key Views & Dialogues
$NTDOY: is Nintendo’s flywheel actually there? | Accrued Interest
Nintendo’s Switch 2 flywheel remains unproven: low attach rates, roughly flat online subscribers, a Zelda remake-led holiday slate, and Pokémon potentially delayed until spring 2027 leave the new cycle dependent on aging IP. Memory inflation has forced an early price increase, while Spotify’s 2024–2025 royalty resets and new audiobook revenue offer a cleaner path toward 20% operating margins by 2030.
View summary (8)
Simeon McMillan’s Nintendo bear case is that Nintendo remains a cyclical hardware company whose promised flywheel has not appeared. Strong Switch 1 software sales are extending the old cycle, but Switch 2 needs new system-selling releases to migrate the audience; after bundled Mario Kart, the holiday centerpiece is a Zelda remake and Pokémon may not arrive until spring 2027. His conclusion: Nintendo may work as a trade around releases, but it is “not a stock you can put away and forget about.”
Andrew Walker sees Nintendo’s remake economics as evidence of an unusually renewable “oil well,” while McMillan sees a content gap masked by nostalgia. A decades-old Zelda remake could become a global bestseller, but McMillan argues Disney kept its franchises fresh through acquisitions rather than endlessly producing “Mickey Mouse part 10.” Nintendo’s second Christmas without another flagship title therefore rests heavily on older IP, third-party games already released elsewhere or years old, and fans whose reaction to its showcase was effectively: “That’s it?”
The weakest flywheel evidence is the combination of a low attach rate and stagnant subscription accounts. Switch 2 buyers are purchasing fewer games than Switch 1 buyers did at launch, even though the free bundled Mario Kart—“their Avengers game”—inflates the figure; bulls counter that existing Switch 1 libraries reduce the need for new purchases. McMillan’s sharper rebuttal is that Nintendo’s disclosed online subscriber count has been roughly flat over the last couple of years: “They’re milking more and more out of a strong fan base.”
Hardware inflation and Nintendo’s limited online strength constrain the margin story. Memory costs forced an unusually early console price increase when consoles normally become cheaper, making a Switch 2 Lite unlikely soon; margins should improve as software mix rises, but another hardware generation eventually resets them. McMillan wants two or three movies annually, a dozen parks, and far more television before treating licensing as a recurring, high-margin engine.
Pokémon demonstrates both Nintendo’s IP potential and the fact that Nintendo captures only part of its economics. Walker estimated that Nintendo owns roughly 35%, while cards, toys, collectibles, and other consumption keep younger users engaged beyond games; Walker calls that ecosystem the blueprint for Mario and Zelda. McMillan agrees it is “the ideal,” but partial ownership means Pokémon cannot move Nintendo’s economics as much as a wholly owned franchise could. McMillan also said he believed Pokémon Go had been sold to a gaming company he thought was owned by a Saudi conglomerate.
Spotify is McMillan’s cleaner compounder because label bargaining power has shifted, premium subscriptions keep compounding, and margins now have a credible runway. The 2024–2025 licensing resets lowered royalty rates as Spotify grew, while podcasts moved from “a money pit” toward profitability and extra audiobook credits reportedly reached roughly a $100 million run rate. At about 40× earnings and low-double-digit revenue growth it is not cheap, but McMillan sees high-teens-to-20% earnings growth, operating margins rising from roughly 14% toward 20% by 2030 and potentially 30%, plus 25–35% upside without multiple expansion.
Netflix looks cheaper than Spotify—roughly 18–20× earnings versus about 40×—but McMillan assigns Spotify higher conviction because its competitive path is cleaner. Netflix’s low-double-digit revenue growth, low-to-mid-30% operating margins, path toward 40%, global distribution, sports reach, and ability to “feast” on linear television make it a value stock; however, YouTube and irrationally persistent media rivals will remain. Netflix’s global scale lets it spread content costs over a much larger potential audience, and it is also picking off leading YouTube creators, sometimes exclusively, using YouTube as a kind of pilot season. Its long-term possibility is an entertainment super-app that bundles other services and takes a cut, but near-term alpha must come from earnings: “Follow the earnings, not the noise.”
Walker and McMillan disagree most sharply over generative AI’s threat to filmed entertainment. Walker extrapolates from the crude Will Smith cheeseburger clip to a possible two-year-horizon AI sitcom overseen by one writer—even a Friends knockoff called “Acquaintances”—while McMillan sees today’s output mainly as YouTube children’s slop, fake trailers, and copyright arbitrage. His defense is that media only looks formulaic: templates do not reproduce “that last little 2% that makes it magic.”
$FOX dropped 25% buying $ROKU. Is the market wrong? | Accrued Interest
Fox’s $22B purchase of Roku adds the “front door of streaming”: roughly 44% of big-screen streaming TV viewing and 100M North American connected TVs, while a relaunched homepage and Tubi offer monetization upside. Management’s $1B of 2028 free cash flow implies 22x EV/FCF, or 16-17x with “light synergies,” but Walker’s winner’s-curse and self-preferencing objections leave execution, advertiser economics, and AI’s impact on time share unresolved.
View summary (8)
- Simeon McMillan’s core frame: Roku is “a little bit like the Strait of Hormuz for streaming in the United States” — it controls roughly 44% of big-screen streaming TV viewing, about three times the next competitor (which he believes is Amazon). Fox’s $22B purchase buys “the front door of streaming” and ~100M connected TVs, all in North America, and McMillan calls it a transformational acquisition despite Fox stock falling from ~$61 to under $45 since announcement.
- The valuation looks worse on paper than under the hood. McMillan tentatively recalls the headline as roughly 22x EV/EBITDA, but using management’s ~$1B of 2028 free cash flow it’s about 22x EV/FCF, dropping to 16-17x with “light synergies” — and host Andrew Walker says that “actually seems cheap to me” for a growing platform, even while pressing the winner’s-curse case on a well-shopped deal with only $400M of cost synergies.
- The monetization upside comes from founder-led self-help. Anthony Wood long resisted redesigning the homepage and, per an Information deep-dive McMillan cites, refused ad money from any advertiser outside the media sector — “that’s crazy… turning away money” — so the recently relaunched homepage, with Fox, Comcast and Netflix as early partners, leaves obvious low-hanging fruit for a buyer.
- Walker’s sharpest pushback: this sounds like a bull case on Roku, not on Fox-plus-Roku — “anyone could have gotten this,” and a Switzerland Roku auctioning its front page to the highest bidder might beat Fox self-preferencing, the way Google doesn’t need to own GEICO. McMillan’s rebuttal: Fox avoids the cash bonfire of running its own streamer, gains negotiating leverage after YouTube TV “punched Disney right in the mouth,” and uses old Viacom as a warning about the risk of being permanently impaired as a pure-play — “Fox no longer is tied to the cable bundle.”
- Tubi is “the Fox piece that I’m the most bullish on.” ~100M monthly active accounts, 2-3% of big-screen viewing (almost equal with Prime Video), and about one-third audience overlap with Roku when deduplicated — combining Tubi’s free on-demand with the Roku Channel’s linear-style streaming triples advertiser reach, and a future Fox Super Bowl “could be on Roku. And Tubi. And linear.”
- Why sell now: McMillan says streaming viewing and ad budgets were reaching a majority share, while the buyer pool was objectively shrinking — Walmart took itself out with Vizio, Amazon was no longer available, and Paramount might have been a buyer a year earlier. Walker floats an AI-slop tail risk to Roku’s time share; McMillan flips it — AI content fragments media further, which “is only going to make who controls the pipes even more important.”
- The Spotify “gotcha” reveals McMillan’s Pokémon theory of media investing: “your media type… matters what you can then evolve into.” He’s underperform on Spotify despite the platform parallels because audio CPMs will always be lower and slower-growing, music is undifferentiated across services, and YouTube Music can raid Spotify’s bucket more easily than Spotify can raid video’s.
- Walker says McMillan has strong buys on Google and Meta; McMillan calls them “true value stocks” that are “perennially doubted” while ad impressions spike and pricing holds. McMillan expects re-rating once CapEx dials down — “the catch-up can be fast and abrupt” — and flags Meta’s enterprise tools as the most under-appreciated asset; Walker notes core Meta trades at maybe 11x after-tax operating profit growing 20% if Reality Labs is added back.
Accrued Interest’s Simeon McMillan on $VSNT and the evolving media space
Versant’s dividend-driven rerating contrasts with McMillan’s $27 conservative fair value versus $35–36, while free cash flow falls 15–20% annually. 2028 brings NBC’s ad-sales separation and easing Morris Trust restrictions, potentially exposing packaged-advertising economics and weakening carriage leverage. GolfNow and TeeOff’s estimated 75% share is strategic, but mid-single-digit growth may not offset media declines.
View summary (7)
- Simeon McMillan’s core call on Versant is underperform: he argues its financials are overearning because they still sit under “the protective halo of the NBC family,” whose ad-sales relationship ends in 2028. He pegs conservative fair value at $27 versus a current $35–36; the stock rerated after management announced a roughly $1.35 dividend, or about a 4–4.5% yield, not because of operating results. Free cash flow is falling 15–20% a year: “it’s scary out there.”
- 2028 is the load-bearing date: the Morris Trust restrictions affecting M&A and other strategic deals come off around 2027–28, while NBC fully separates from the Versant channels’ ad-sales department in 2028. Ads are sold as packaged portfolios, with the Olympics, football and rotating Super Bowl helping force purchases of weaker networks. Versant’s sports rights are largely NBC sports rights that did not fit on the NBC network. Until the restrictions ease, “management knows that their hands are tied… they literally couldn’t even sell the company if they want to.”
- Carriage renegotiations without NBC will be brutal: McMillan says the industry has entered a regime where “channels are just getting dropped and staying dropped.” He calls YouTube TV’s Disney standoff—allowing subscribers to miss about two weeks of NFL and college-football games—“shooting the hostage,” and says it extracted free ESPN+, WWE and UFC pay-per-view content. “Versant doesn’t have those”; he expects its channels to be “completely railroaded.”
- The hidden gem is the golf software business: the golf assets are roughly $600 million of revenue on each side, with GolfNow/GolfPass and TeeOff controlling an estimated 75% of the third-party tee-time aggregation market. When Walker asks about the model, McMillan says he is not sure of the exact sales agreements but thinks they are probably percentage-based. Golf is still growing, but the software side is only growing at mid-single digits, maybe high-single digits, if that—“not growing fast enough, with margins high enough,” to change the equity story. Walker’s comp is Mindbody, acquired for roughly 7–8x revenue in early 2019.
- CNBC is the trophy asset, but it needs a trophy buyer willing to pay a trophy price: Walker floats a large tech company such as Amazon or, more speculatively, Robinhood. McMillan says financial news, like political talk, “is clearly being disrupted by podcasts.” His year-one Substack thesis is that “YouTube competes with everything”; putting legacy TV content there is “a devil’s bargain,” while podcasting talent means companies have “no choice but disrupt yourself.”
- On the NFL, McMillan says Fox’s existence is tied to the league and expects the same broadcast partners to remain because the NFL is overwhelmingly domestic and broadcast still reaches the most viewers. Walker asks why YouTube TV—already carrying Sunday Ticket—or Netflix would not take a package and says the incumbents may “bid their enterprise value.” McMillan counters that sports video is Netflix’s lowest-margin product; Netflix would rather surgically select high-juice events such as the Home Run Derby or World Baseball Classic rights for Japan than take a full season. Walker’s Pro Bowl claim was undercut by the flag-football version’s worst ratings in 30 years, down 60% year over year.
- The closing thesis is audience-driven: McMillan’s Nielsen Gauge tracking shows Warner Bros. stuck at 1.5% of big-screen viewing and Paramount below 2% every month, while YouTube’s rise is “meteoric.” “If you don’t have the audience, you’re not going to have the value. And financial engineering is not a strategy.” Asked about Paramount–Warner Bros., McMillan says the odds are “-10” and asks when the breakup will come, adding that he generally likes the assets but could not be more negative on how the combination is playing out.
Nexstar Media: Broadcasting’s Biggest Bet - [Business Breakdowns, EP.221]
Nexstar reaches 68% of the US population through roughly 200 stations, 116 markets and LMAs around the FCC’s 39% cap. With $2B of 2024 adjusted EBITDA and 50-60% free-cash-flow conversion, reverse retransmission approaching 60% of distribution fees, cord cutting and weaker NFL leverage could make relaxed ownership limits a catalyst for another M&A cycle.
View summary (6)
- Zack Fuss frames Nexstar as a rollup machine nearing the end of its runway — “sometimes the rollup can run out of runway” — because its organic growth drivers have “either tapped out, stalled out or are currently in decline.” McMillan details how Nexstar became the largest local-TV station group outside the Big Four (~200 stations, 116 markets, 68% population reach via LMA arrangements around the FCC’s 39% cap) through deals like Media General ($4.3B, 2017) and Tribune (2019).
- The financials still screen like a value stock: ~$5.2B market cap, ~$12B EV, 3.5-4x net leverage, $5.5B 2024 revenue, ~$2B adjusted EBITDA (37% margin), with 50-60% of EBITDA converting to free cash flow. Revenue mix has flipped from ~75% advertising a decade ago to 55% distribution fees today — but McMillan warns the reverse-retrans give-back to networks is ~50% of those fees, “pushing to upwards of 60%,” and “trending in the wrong direction.”
- Cord cutting has broken the old escape valve of raising rates on a shrinking base. Pay-TV households fell ~30% in a decade, from 100M to ~70M; traditional cable fell more than 50% to ~50M. YouTube — not Netflix — is the top disruptor, hitting 12% of big-screen TV viewing in April 2025, a fifth consecutive all-time high. “Everything is weakening for the TV ecosystem,” while cable companies “don’t care about the video product” anymore.
- The last major bargaining chip is the NFL: “your local broadcast station is still by far the overwhelming way most Americans watch NFL games.” But the demo skews over 50, younger households skip pay TV entirely, and every point of leverage “is getting weaker every cycle” as networks pull sports onto streaming.
- McMillan dismisses the two favorite bull cases: The CW and NewsNation are not yet material to earnings, and ATSC 3.0 is “a little more of a pipe dream” — a decade of limited progress because the industry never set a hard cutover date like the HD transition, TV makers skipped the receiver components, and encryption prevented DVR recording and casting. “The technology hasn’t panned out.”
- The tradeable conclusion: in a melting-ice-cube industry, “capital allocation is not a strategy” — the smartest media operators were the ones who sold (Murdoch to Disney; AT&T outperforming Warner Bros. Discovery afterward). His own cautionary tale: he won the Ira Sohn idea competition in 2013 pitching Tribune long at $55; it ran over $100 on consolidation hype but last traded in the high 40s in 2019. “If you’re a broadcast investor, the best thing you could probably do is find a way to sell your assets to Nexstar because they’re going to be a buyer.”