Diane Mermigas continues to write sobering posts about the media economy:
In Economic Woes Mean TV Ad Pullback, Media Shift, she writes:
The economic woes driving the stock market to new lows will impede spending
by advertisers that are ambivalent about waning consumers and a transforming
media market. The big unknown is TV ad dollars–how much will be held back and
shifted to alternative media. ¶ The answer will become evident in the coming months as formidable exceptional
factors, from less original network programming and the continuing digital
revolution to the paralyzing debt and credit crunch, play themselves out. ¶ The four-month writers’ strike will wreak more havoc with broadcast
television revenues in the first half of 2008 than it appears to have done in
the fourth quarter. Advertisers have been less likely to shift away from the
broadcast networks or take a hard line on makegoods when the networks were running off their
original series episodes last fall. ...
Link: MediaPost.
Also see Nowhere To Run: Trickle-Down Theory Impacts Advertising:
Amid the chaos and panic created by Wall Street and the Federal Reserve,
ad-dependent companies are scrambling to determine just how impaired their
financial lifeline will be in a troubled economy. Three words: trickle-down
effect. ¶ The broad-scale tumult is filtering down into the crevices of all media and
advertising companies. They are making adjustments in spending as their costs,
revenues and credit tighten. They are watching their stocks get hammered, and
their ability to leverage assets or do deals is drying up–for now. ...
Link: MediaPost.
And, Strike, Recession: 2009 Media Outlook Is Grim:
Media, tech and Internet companies, and the Wall Street analysts who cover
them, are looking beyond the current tumult to the rest of this year and into
2009. Unfortunately, many don’t like what they see.
Link: MediaPost.
Finally (for this post), Bottom-Line: Media Cos. Must Restructure Or Face Consequences:
Media companies are in a valuation nightmare. Their problem: being valued
almost exclusively on old models and metrics, while not yet reaping the
balance-sheet benefits of an unfolding digital nirvana. Their challenge: to
accurately assess their stagnating traditional businesses and rising revenue
streams while shaping growth prospects. ¶ This inevitable valuation quandary is underscored by a spate of grim earnings
forecasts for media and entertainment companies from Wall Street analysts, who
are also wrestling with the complex assessment challenge. It is an issue for
investors and deal-makers trying to project beyond the single-digit, even
negative growth expected for more traditional TV, film and print. It is also an
issue for labor and management, which are struggling to construct plans for
future income. ¶ Over the past four years, that digital interactivity has exploded on the
scene, and the S&P Media Index has underperformed the broader S&P 500 by
more than 40% due to continuing structural concerns about future growth,
according to Bernstein analyst Michael Nathanson. These include the adverse
impact of technology (DVRs, time-shifting devices), the shift of ad dollars to
the Web, and the pressing need to completely reinvent traditional media models.
The negative impact of slower economic growth on advertising and discretionary
media spending is becoming more assured. This lethal combination has pushed
earnings multiples for media stocks to historic lows. ...
Link: MediaPost.
But wait, there's more! This chart from Joe Mandese, Optimism Declines Among Ad Execs, All Media Impacted, Even Online. Click for larger image. Link: MediaPost. Thanks to Terry Heaton for the tip on this one. --Dennis
