The broadcaster has begun to warn more than 1.5M viewers in 14 markets that its stations could disappear from Time Warner Cable and Bright House Network systems at the end of next week unless the companies reach a new retransmission consent agreement. Stations at risk include LIN TV‘s NBC, CW, and MyNetworkTV affiliates in Austin; CBS and CW stations in Buffalo, NY; NBC and CW outlets in Dayton, OH; and Fox and CW stations in Green Bay, WI. The two cable companies account for about 20.6% of LIN’s viewers, according to SNL Kagan data. LIN says on its Buffalo CBS affiliate’s website that “It costs a substantial amount of money to produce local programming, bid for top-quality programming, invest in high-definition, and make other upgrades to equipment and technology so we can deliver a superior product.” It adds in a statement that it wants “less than what Time Warner pays for many of its cable networks with far lower ratings.” But Time Warner Cable spokesman Jon Gary Herrera says that LIN is asking for a 50% rate hike, “a very steep increase from a contract negotiated two years ago.” Stations and pay TV companies typically settle retransmission consent disputes at the eleventh hour. But LIN’s stations were blacked out on Time Warner Cable for 25 days in fall 2008 when negotiations reached an impasse.
It will take years before most ad sales will hit the peaks that TV stations saw in 2007, Moody’s Investors Service analyst Carl Salas says this morning in an industry report. Local businesses have been slow to increase their spending after the economy tanked in 2008 and 2009 — and now broadcasters must compete for those dollars against websites, social media, digital displays and other emerging media. Sure, stations will see some extra cash from retransmission consent deals with pay TV providers. But it won’t be a windfall: Major networks are demanding reverse compensation agreements from their affiliates, giving the national broadcasters much of the dough collected by the stations that they used to pay to carry their programs.
The benchmark Standard & Poor’s 500 was up 4.3% today after central banks in the U.S., Europe, and Japan said that they’d help supply cash to avoid a credit crunch if the European debt crisis worsens. That buoyed media stocks: The Dow Jones U.S. Media Index was up nearly 4.4%. CBS shares rose 5.8%, giving it the biggest bump among the elite group of Big Media companies. It was followed by Disney (+5.4%), News Corp (+5.4%), Time Warner (+4.3%), Viacom (+4.3%), Comcast (+4.2%), and Sony (+2.7%). Among other media companies, Westwood One and The New York Times were up more than 10%. Companies up more than 9% include Outdoor Channel, LIN TV, and Entercom. Only a few companies lost ground. The hardest hit was Netflix, down 4.5% after Wedbush Securities’ Michael Pachter downgraded the video rental firm to “underperform” from “neutral.” His rationale: “We think that the company’s pricing structure is wrong, and its business model is broken. At current prices, we expect Netflix to continue to lose more hybrid (DVD and streaming) customers than it adds, and those who remain will not be particularly profitable.”
The federal government will have to slash $1.2T in spending, mostly beginning in 2013, if the 12-member congressional Super Committee can’t strike a deficit reduction deal soon. They still appear split — even though, as a practical matter, they have to reach an agreement by midnight in order to have something ready for the official Wednesday deadline. That drove most company shares down, with a late uptick possibly softening the blow. The Dow’s U.S. Media Index was down 1.2% about 20 minutes before the end of the trading day. Disney was hardest hit among the industry’s biggest players: Its shares were -3.5%, followed by Sony (-3.4%), CBS (-2.3%), Viacom(-2%), and Time Warner (-1%). Comcast was up about 0.5%. Among other media companies, Cinedigm (-8.8%) and RealD (-7.2%) took the worst beatings. Others down at least 4% include E.W. Scripps, Entercom, Crown Media, Netflix, National CineMedia, Live Nation, LIN TV, and Dish Network. Gainers include Westwood One, Barnes & Noble, Sirius XM, Radio One, McClatchy, and McGraw Hill.
The Dow Jones U.S. Media Index was down 3.5% today while the DJ Industrial Average was off 2.4% — and Goldman Sachs may have contributed to the imbalance: It downgraded the entertainment sector today to “neutral” from “attractive” saying that ad sales will be weaker than expected as the overall economy softens. That came as the market also reacted to Greece’s report over the weekend that it will fail to hit its deficit-reduction targets for the year — increasing the possibility of a default. CBS, -7%, was the biggest loser among the major media companies. It was followed by Viacom (-5.1%), Sony (-4.7%), Disney (-3.9%), Time Warner (-3.4%), and Comcast (-2.2%). In the broader media market, broadcasters Westwood One, LIN TV, Rado One, and Entercom were down by more than 10%. Pandora, Live Nation, Crown Media and Cumulus Media lost more than 8% of their market value. A few companies were up for the day including Yahoo (+2.7%), Regal Entertainment (+2.0%), Coinstar (+1.6%) and Time Warner Cable (+0.2%).
The bears are back. After a relatively calm week, stocks prices across the board — including in media — are tanking today following reports that point to rising unemployment and inflation, and weakness in manufacturing. An hour before the market close, the Dow Jones, S&P 500, and NASDAQ indexes for media stocks each were down at least 5.4%. Among the Big Media giants CBS is -10.7% followed by Time Warner (-6.1%), Sony (-5.7%), News Corp (-5.2%), Viacom (-5.2%), Comcast (-4.8%), and Disney (-3.2%). Elsewhere on our watch list, Pandora Media (-12.9) is taking the biggest hit with LIN TV -9.4%. Others falling at least 8% include Gannett, Live Nation, Entercom, IMAX, Radio One, McGraw-Hill, and Discovery. Those off at least 7% include Cablevision, Amazon, TiVo, Netflix, McClatchy, Coinstar, Arbitron, and Scripps Networks. And companies down at least 6% include Barnes & Noble, Washington Post, E.W. Scripps, Sinclair Broadcasting, Outdoor Channel, and Dish Network. The only gainers are Lionsgate (+0.3%) and Cinedigm (+1.3%).
Media stocks likely will take even more punishment if the economy weakens. When times are bad shares of companies with high fixed costs, lots of debt, and that depend on ad sales, fall more dramatically than the overall market, Needham & Co analyst Laura Martin says today. She says that Discovery may be the best media stock to own now — but adds that it would be even safer for investors to own a fund of stocks that mirrors the S&P 500.
UPDATE 4:10 PM: The markets couldn’t sustain an early afternoon rally amid concerns that France might lose its AAA debt rating and that Spain or Italy might default on payments. The Dow Jones Industrial Average fell 4.6% while the S&P 500 dropped 4.4% and NASDAQ was down 4.1%. But media companies were mixed, with some showing big improvements from mid-day. Disney remained the hardest hit of the Big Guns with shares falling 9.1%. It was followed by Sony (-5.7%), CBS (-5.4%), News Corp (-4.7%), Time Warner (-4.6%), Comcast (-4.5%), and Viacom (-0.3%). Among other media companies, Crown Media, Westwood One, and E.W. Scripps fell at least 10%. Entercom, The New York Times, and Gannett were off at least 9%. And Martha Stewart Living Omnimedia, AOL, and LIN TV were down at least 8%. Some companies were up including Cinedigm (+8.7%), National CineMedia (+4.3%), New Frontier Media (+2.7%), DreamWorks Animation (+2%), Lionsgate (+1.8%), Pandora Media (+0.6%), and Coinstar (+0.1%).
PREVIOUS, 9:00 AM: Here we go again. Stock markets at mid-day have given up just about all of yesterday’s gains following the Fed’s pledge to keep interest rates low — and media companies are being hammered. The Dow Jones U.S. media index is -4.7% while the Dow Jones Industrial Average is -4.1%. Similarly the S&P media index is off 5.5% while the S&P 500 is -3.8% and NASDAQ’s media shares are -4.8 vs. the overall exchange which is -3.3%. Here’s how industry giants are faring at mid-day: Disney (-10.7%), CBS …
UPDATE, 2 PM: The market deteriorated as the day wore on, continuing the worst market slump since 2008. The Dow Jones U.S. Broadcasting and Entertainment Index closed down 7.3% — exceeding the 5.6% decline in the Dow Jones Industrial Average, 6.7% drop in the Standard & Poor’s 500, and 6.9% fall at NASDAQ. CBS’ -10.3% slide made it the leading loser among media’s Big Guns. It was followed by News Corp (-7.7%), Viacom (-7.1%), Comcast (-6.6%), Sony (-6.4%), Disney (-6.1%), and Time Warner (-5.8%).
Double-digit losers include AMC Networks (-12.8%), LIN TV (-12.7%), Sirius XM (-12.7%), RealD (-12.6%), Cumulus Media (-11.9%), TiVo (-11.4%), Entercom (-10.9%), Westwood One (-10.8%), and E.W. Scripps (-10.3%). Those losing at least 9% include National CineMedia, Dish Network, Arbitron, Sinclair Broadcasting, Rovi, Outdoor Channel, Crown Media, Electronic Arts, Cablevision, and Coinstar.