While the traditional big media companies performed better than expected in 2006 because valuations were less expensive and they focused on controlling and cutting cost better, Banc of America analyst Douglas Shapiro believes that 2007 doesn't look like it will be a good year for growth for the big companies.
According to Shapiro he believes that valuations are at right at the levels they should be, trading at approximately 30-40% to the market.
He also said that “We believe there is clearer evidence than ever that advertising is growing more slowly than GDP, losing share to marketing services.”
Shapiro added that “While reports of the death of traditional ad media have repeatedly proved premature, they continue to slowly lose share and nothing seems likely to change the trend. History dictates that ad dollars follow eyeballs 
with a lag, and eyeballs continue to migrate away from traditional media.”
He makes an important point as far as the lag between ad dollars taking a little longer to migrate. In other words, the transition is already happening, and people are moving with it, but at a slower pace than where people are going to consume media.
There were also concerns in how the macroeconomic situation could impact the sector. Things like interest rates, housing slowdown, inflation and tightening the money supply could all decide outcomes for the year.
One of the key unknowns for the year, according to Shapiro, is the role that private equity firms may have in the whole process. They are currently trying to hammer out deals with Hollywood in their movie businesses.
From my way of looking at things for 2007, it looks like it will be one of the most interesting years to watch for the big media companies in relationship to filmmaking in particular. They will be presenting probably the biggest array of blockbuster movies at any time in history. The expectations are extraordinarily high.
How that will impact the bottom line and growth of the industry for the year is not known. As Shapiro says, some of the results may be connected to forces outside of the industry's control.
If some of these forces come about, and the ad industry lag continues, it could be a year that could hit the industry hard. It's not going to be boring, that's for sure.
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