The stocks of the mainstream media companies were hammered across the board this year, as the majority of them dropped in value.
For the year, CBS (CBS-A) has plunged by 14 percent; Viacom (VIA-B) by 9 percent; Disney (DIS) by about 8 percent; News Corp. (NWS-A) by 7 percent; and Time Warner dropped by 5 percent.
Now with the overall industry being ad dependent, and a potential recession on the horizon (slowdown at minimum), a recovery doesn't look like it's going to come any time soon. A lot of that will depend on how long the slowdown lasts.
Companies with a stronger presence in cable, and in my estimation the Internet, shouldn't be hurt as much as the others. Both those areas are growth areas for advertising, and shouldn't be hurt by a slowdown, or even a recession if that's what happens.
One area helping the industry, as far as television goes, is the presidential race, which will continue to bring in a lot of ad money.
Even so, David Joyce, an analyst with Miller Tabak & Co., said economic conditions would cause the revenue generated from political campaign spending to be negated.
“For the conglomerates, there’s the strike effect and recession fears. There is usually a high degree of correlation between advertising spending and the economy,” Joyce said.
Again, that applies more to some companies than it does for others. Look at News Corp. and its Fox Network. They not only have "American Idol" back commanding top advertising dollar, but have the Super Bowl coming up where they've sold all their ad inventory and making a lot of money.
NBC, not mentioned as one of the top five media companies above because they're part of conglomerate General Electric (GE), have the Olympics coming up, which will make them a lot of money as well.
Still another variable is the falling value of the US dollar, which has generated a lot of traffic to theme parks in the country, which helps Disney and others. At the same time, some of the national and regional traffic to them has declined because of higher gas prices.
Then you have those that own newspapers, have stronger Internet presences than others, and are have a stronger global presence than others.
All of this is to say that it's becoming more difficult to measure where the industry is going, as they have one step in the old media world, while migrating to the new. All of these forces are at play at once, and makes it difficult to project into the future where the mainstream media companies will end up as far as related to share price and growth.
Couple that with their entry into the uncertainty of new media and you have a garbled picture, that will take some time to unravel.
For me, I can't see anything that offers the clear idea that major media companies will turn around any time soon. At the same time, they are definitely worth watching because of their low valuations.
The only way to look at them is for long term investing. In the short-term, there is still a lot of volatility left, and unsurety on where the industry will end up going. They probably aren't at their lowest levels yet, and have some room left to fall.
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