The following commentary first appeared in the "Dow of Steve" blog on SNL Kagan's subscription website on July 1, 2009.

There were signs at last that the upfront market was finally beginning to move although few, if any, deals have been struck between broadcast networks and advertisers. Experienced observers can point to only one other instance of the market breaking so late and rumblings about a haphazard, last minute ad marketplace that serves advertisers and networks poorly are growing. [UPDATE: The upfront stalled again after the July 4th holiday, though the bid-ask spread on advertising has narrowed]

Netflix (NFLX) has been a favorite short target of Stone Fox for a while. Luckily we've never engaged in more than short term short positions on this stock as it's been one of the bright performers during this recession. The recession and high gas prices have in fact likely helped business as consumers have migrated to the cheapest forms of entertainment - DVD rentals via mail. It saves gas and eliminates late fees, all for a low monthly subscription fee.

Getting DVDs via the mail is clearly a doomed business as even highlighted by the CEO in this Wall Street Journal interview. It's actually pretty incredible that the business model as done so well considering the huge competition in the DVD rental space and the fact that renting by mail was actually seen as a step back for that market. After all, why wait days for a item via the mail when you could just stop at the local store and pick up whatever you wanted and the price of $2-4 per rental didn't seem overly costly? That's where the catch for the current and future business models comes in.

Global advertising expenditures across television, newspapers, magazines and radio dropped 7.2% during the the first quarter of 2009 vs. the same period in 2008, according to (pdf) a global advertising trends report released today by The Nielsen Company.

By Brandon Matthews

Yes, it’s true. Webcasters have reached a deal with the recording industry that offers them a temporary reprieve, much like a death row inmate that has been granted a stay of execution. In the end, however, the result will be the same in my opinion. Both the inmate and streaming radio sites will cease to exist.

As a follow-up to yesterday’s gloomy prediction for traditional advertising spend, I have some salt to pour on the wounds:

"…cannibalization of traditional media will bring about a decline in overall advertising budgets, death to obsolete agencies, [and] a publisher awakening…"

Meredith Corporation (MDP), the media and publishing company, posted a 45% drop in fiscal Q3 profit back in late April. The company announces its fiscal Q4 earnings at the end of July.

The short base (as measured by Percent Shares Outstanding On Loan) is up nearly 20% on the week and currently stands at 11.25%. Since the beginning of June, MDP has seen a 17% drop in its stock price, while at the same time its Utilization (which measures supply and demand in the securities lending market) has increased 43% to just under 50% of all lendable stock on loan. The increase in Utilization has not just been down to an increase in the short base, we have seen a drop in the total supply of roughly 20% since January.

Think of it as updated Geritol, a tonic for an industry with tired blood.

Its founders call it Circulate, and it's the latest "solution" to address the woes of newspapers. It aims to get the blood flowing -- online -- by re-directing readers to more like content, newspaper content, by and large. If you haven't heard much about it yet, it might be because we're experiencing some early summer media fatigue. In addition, we've lately heard an alphabet soup of "paid content" solutions. Much publicized was the NAA Chicago fly-in for publishers. There, Journalism Online, Attributor and ViewPass all participated in a Q and A, the better to keep anti-trust concerns away. Since then, the principals of each of those companies have been kept busy, pitching individual publishers; call it Newspaper Roadshow.

By Leena Rao

A new Forrester report (Marketing Budgets Suffer Significant Cuts) suggests 71% of CMOs have seen their marketing budgets reduced–of those, 51% saw a reduction of at least 20%!

It’s enough to send any marketer running for the hills, but really it’s only those knee-deep in old school channels that need to worry. As the chart below indicates, online advertising, email marketing, and social media are the least hit, with TV, print and radio seeing a whopping 67% decrease!

On Sunday, the SF Chronicle stopped printing its paper, laying off 200 union printers and shifting the work to an outside contractor. Compared to going out of business, it’s small potatoes, but it’s one more data point in the long secular decline of newspapers (not to mention unionization of non-government workers).

By going to the market (rather than vertical integration), the Chronicle was able to not only save costs but get more up-to-date printing presses. The Chronicle does not see printing as a core competency, and thus abandoning the traditional vertical integration (at least in a large metropolitan area like SF) makes sense. Still, the in-house story seemed slanted towards the nominal benefits (“wrinkle-free era begins”) rather than the cost savings.

I purchased CBS for most Northlake clients on July 7th. The stock has pulled back by 33% off its recovery high, leaving it at a point where I think the risk-reward tradeoff is favorable. I can easily construct a scenario where the stock moves from $6 to $9 assuming that advertising trends begin to improve and turn positive late this year or early in 2010. If I am wrong and advertising trends remain negative, I think downside is contained at $4.50, setting up $3 of upside against $1.50 of downside.

CBS is highly leveraged to the economy due to the fact that 70% of its revenue comes from advertising. TV is the largest business segment along with significant exposure to Radio and Outdoor Advertising. The purchase of CBS is consistent with my view that the economy has bottomed and will show sustained improvement later this year.

A study by Harris Interactive states that one-third of Americans find TV advertising to be more helpful in making purchase decisions than any other medium. According to the study, 37% favor TV ads, 17% favor newspaper ads, and 14% favor Internet search engine ads, while just 3% favor radio ads in making purchase decisions. Here is where radio gets competitive. In a response to the question, which type of ad do you tend to ignore the most, 46% said Internet banner ads are ignored while just 9% ignore radio ads.

Radio finally beats the Internet at something, even though most of radio's ad dollars have found their way online and the stock prices of the radio companies have been decimated as a result. Not sure what this means for the radio companies and I doubt that ad dollars will make their way back to radio.

By Brandon Matthews

Traditional forms of media including television, radio and print are threatened by the success of Sirius XM Radio (SIRI). There is absolutely no doubt in my mind that the organizations behind traditional forms of media have united on a single front to denigrate the Satellite Radio provider at any and all costs. I know this first hand as most of the negative comments left on Satwaves.com can be traced back to everything from terrestrial radio station operators to the National Association of Broadcasters. These traditional media conglomerates control everything most people see and hear. Consider if you will the number 1 hit by the Black Eyed Peas in which the words “Satellite Radio” have been bleeped out by terrestrial radio stations from coast to coast.

The total number of ads being skipped using digital video recorders (DVRs) is currently only about 6%, but that number will rise to between 16% and 18% in two years, according to a report from consulting firm DVR Research Institute, writes MediaBuyerPlanner.

When the economic hemorrhaging stops, broadcast TV stations will still be struggling to close the $3 billion-plus gap between their declining advertising revenues and new online or other digital income.

The widening gap will force some stations to go black or to merge with other local media under more liberal cross-ownership deregulation -- a life preserver that could be provided by a new FCC. Surviving broadcasters will have created and mined digital wireless connections between local consumers, marketers and content. Within five years, it is likely that the TV station business as we have known it will be radically changed.

It is not difficult to draw such assumptions from recently released statistics and revised forecasts.

NXHZ [OTC:NXHZ] a month ago looked like any other struggling Cable aggregator, however that changed dramatically with 3 announcements. The first was an upgrade to the latest technology that on the face of it looked like over kill for the size of the firm's current subscriber base.

That was quickly followed by news the company was building an extra 1200 mile of Fiber-Optic cable in California which made the technology announcement look more realistic, but then came the big news, the acquisition of a cable operator in Mexico more than doubling the size of operations immediately and giving them the ability to expand into one of the world’s biggest Cable Markets, South America.

Both tech titans and media giants are gloomy these days, though for different reasons.

The truth is that media companies’ future have forever changed: the world is no longer an analog one and the shrinking media landscape that comes with the digital reality makes it hard for media companies to maintain their market capitalizations and revenues of days gone by. One industry - print newspapers - is essentially decimated and will never be the same. But across the board, things don’t look better for TV, either.

At the Aspen Ideas Festival this week, Andrew Sullivan said,

Journalism has become too much about journalists.