In the face of a US recession and the writers strike, US media and entertainment conglomerates are preparing to release reports on their latest quarterly earnings. An article in The Hollywood Reporter (31 January) says there is widespread talk sweeping through Wall Street “of a possible recession, which traditionally hits advertising revenue that media firms rely on’. Added to this, there is also the writers strike.
Many saw their fears confirmed on Wednesday when the Commerce Department said gross domestic product growth, a key measure for the strength of the economy, suddenly slowed in the fourth quarter to 0.6%, compared with 2.2% for the whole year. There also appeared to be little reassurance forthcoming from Washington’s need to support economic momentum with a further expected interest rate cut by the Federal Reserve.
“Media and entertainment stocks already have declined sharply in recent months as they often do ahead of an official confirmation of a recession, even though some warn economic gains still could be sustained,’ states The Hollywood Reporter.
But just how bad the future may be for broadcasters who rely on advertising revenue is unclear. There are mixed reports coming out. For instance, News Corp chairman and CEO Rupert Murdoch said last year that he expects an economic slowdown, but his president and COO Peter Chernin recently signaled this hasn’t hurt advertising trends at News Corp.
“Wall Street and the media might be talking us into a recession that isn’t here yet and may not happen,” said Hal Vogel, president of Vogel Capital Management.
According to The Hollywood Reporter “analysts expect the conglomerate’s film unit to report double-digit revenue and operating income declines for the latest quarter because of a more limited DVD release slate and tough comparisons with the year-ago period, which included the theatrical run of Borat. However, Alvin and the Chipmunks and surprise hit Juno provided some cushion for the film unit, according to Wall Street.’
