Rob Black's Media Stock Report

Includes: CKEC, EA, NWS, TTWO
by: Rob Black
Electronic Arts (ERTS) said that the video game"Madden NFL 2007" grossed $100 million in retail sales in its first seven days on the market, the best opening-week performance so far for the video game publisher's flagship sports title and a further sign that the games industry may be coming out of its doldrums.

In addition, Electronic Arts struck deals with two in-game advertising providers, taking its first steps into the online advertising business. Look for ads from Coca-Cola and Honda in games like "Need for Speed: Carbon", "Madden NFL 2007", as well as "Battlefield 2142," a futuristic combat game.

Some video game fans say that adding advertising to certain titles, particularly sports games and those that are set in urban landscapes, adds realism. Others chafe at the idea of having ads in products that can cost up to $60. Video game makers have placed ads in their products for years and are increasingly drawn to it because it promises to help offset rising game development costs. In-game advertising is "poised for explosive growth", forecasting revenue of $730 million by 2010, compared with $55 million last year. Clearly advertisers will line up to get in front of the sought-after young male demographic that is the bulwark of the games industry.

Take-Two (NASDAQ:TTWO) announced its 3rd quarter results would fall short of the current consensus EPS of ($0.21). The company cited higher costs associated with ongoing regulatory investigations, relocation of international headquarters to Geneva, and a provision for income taxes. Revenues are expected to be in line at $240 million compared with the street's $242 million. Management does not expect to file its 3rd quarter 10Q within the time frame required by the SEC due to its ongoing internal investigation of options grants and the related accounting review. The company does not expect to file its 10Q or report full 3rd quarter results until its internal investigation is completed.

Carmike Cinema (NASDAQ:CKEC) announced that its independent auditor, PricewaterhouseCoopers, has resigned. The company indicated in an 8k filing that there were no material disagreements with its auditors. CKEC's audit committee has initiated a search for a new audit firm. A timeline was not indicated, but at this time we do not expect the changeover to impact the release of 3rd quarter 2006 results. In addition, the change in relationship could allow CKEC to negotiate lower fees.

Back in October of 1996, News Corp. (NASDAQ:NWS) struck lightning when it launched a new network called Fox TV which succeeded by going after advertiser rich audience like teens with "Beverly Hills 90210" and men 18-35 with "Married with Children".

In an attempt to recreate that bit of media magic, News Corp. is currently rolling out "Desire," and “Fashion House” two prime-time soap operas that will launch the media giant's latest experiment and newest network, MyNetworkTV. Unlike daytime soap operas, prime-time telenovelas unfold five nights a week and end after 13 weeks. Although they are wildly popular in Latin America, advertisers question whether they will have mainstream appeal in the U.S.

As a result, some have spent cautiously and Fox has only pulled in a little more than $20 million of the projected $50 million in commercial sales. Everyone is curious to see how this will play out but analysts know that when News Corp is committed to something they typically make it work which on Wall Street means News Corp will stick lightning again or come up empty.