Media and Entertainment Outlook Worsens - S&P

The outlook for the media and entertainment industry has become even bleaker in recent months, says Standard & Poor’s Ratings Services, as expected higher ad spending in 2008 from the presidential election and Olympics failed to overcome plummeting non-political ad spending.

The softening U.S. economy is to blame for weaker ad sales, with S&P Ratings forecasting a 1 percent rise for 2008 and a scant 0.9-percent increase for 2009. Ad sales rose 0.4 percent in 2007.

Even online advertising has been experiencing a marked deceleration, despite surging past magazine advertising in 2006 and likely past radio advertising in 2008. Challenges are multiplying in the industry as the U.S. economy edges closer to a recession, financial market turmoil continues and consumers tighten spending in ways we had not envisioned.

S&P warns that companies that executed LBOs in the past three years are laboring under particularly onerous debt loads, resulting in more downgrades than upgrades in 2008.

Among S & P’s findings in the media and entertainment segments:

• Broadcast and cable network advertising has remained relatively healthy but the slowing economy is pressuring TV broadcasters.
• Radio advertising declines are accelerating, with local ad revenues falling 7 percent in the second quarter.
• Internet advertising is growing, but at a slower rate than in 2007.
• Magazine advertising suffered its biggest decline in several years, with drug and remedies ads and automotive ads each falling more than 20 percent.
• Newspaper revenues and cash flows will continue to decline in 2009, with five of S&P’s nine rated newspaper companies in the ‘CCC’-rated category, indicating a near-term liquidity threat.

Comments

[PeteK:]

The media, especially political commentators, even news, are so often so bias and personal, to a point that people are sick and tired of them.
Talk Shows too, so boring and insulting to our intellengence, not even funny but offensive. Most if not all media deserve to fail and they should fail.
Those old guys work there all their lives, never know the outside world.
Many of them never have respect to our national leaders, always make fun of them. Treat our leaders as if they were retarded people. That's why the older generation stopped watching them long time ago.
Now with internet, who needs them.

2008 Oct 16 11:15 PM

[Richard Wak...:]

The print news media faces a structural challenge that will cause restructurings and re-orgs, and even failures. I see the Newspaper Association of America Advertising Expenditures series dropping 15% in 2008 relative to 2007 and 2009 dropping an additional 16.5% from 2008.

if the above forecast turns out to be accurate and considering the print media's high operating leverage, some media companies will not make it.

2008 Oct 22 09:42 AM