Global media companies Viacom Inc. and News Corp. Ltd. Tuesday tallied up hundreds of millions of dollars in losses as advertising revenues were hurt by a weak economy and an uncertain outlook after the Sept. 11 hijacked jetliner attacks.
The attacks led many networks to air commercial-free coverage of the news events for at least five straight days.
For the most part, however, U.S. investors shrugged off the news of losses as having already been factored into stock prices and sent Viacom and News Corp. shares, as well as major media players like Walt Disney Co., higher on the day.
The story was different in Europe where media stocks took another tumble after a slew of profit warnings and stock downgrades due to the bleak near-term outlook for ad spending. Those declines were sparked by warnings from U.S. publishing giant McGraw-Hill Cos. on Monday and France’s Havas Advertising on Tuesday.
Still, in New York the news was just getting out as to exactly how bleak the numbers could be.
DETAILS OF LOSSES BEING DISCLOSED
At a Goldman Sachs investor conference, Viacom president Mel Karmazin said the owner of broadcaster CBS, numerous local TV stations and the MTV cable channel will suffer a staggering $500 million in costs over two quarters due to the attacks.
News Corp. president Peter Chernin said his company’s Fox broadcasting network, affiliated TV stations and cable outlets would lose “tens of millions” in advertising revenues from the attacks,
Viacom and News Corp. join a host of media companies that have warned of financial fall-out from the attacks on the World Trade Center and the Pentagon, which have left about 5,700 people dead or missing.
Last week the Walt Disney Co., owner of the ABC TV network, said its earnings would suffer, but it did not disclose details. Disney President Bob Iger was scheduled to address the Goldman Sachs conference Wednesday, and analysts and other market watchers expected the company to detail its losses.
A Disney spokeswoman declined to comment on Iger’s speech and several analysts would not put a figure on Disney’s losses ahead of the address.
New York-based ad researcher CMR issued a report saying that in the first five days after the attacks, broadcasters lost $313.2 million in combined advertising revenues.
A ‘LOUSY’ AD ENVIRONMENT
News Corp.’s Chernin pulled no punches, calling the current ad environment “lousy” and cutting his company’s fiscal 2002 earnings growth estimate to the high-single to low-double digit percent range, down from earlier company forecasts of between 20 percent and 26 percent.
“Almost all of it was advertising-related,” he said, adding that he expects increased cancellations from advertisers.
“We had anticipated some firming up of the ad business in the fourth quarter and the first and second quarters (of 2002), but we just don’t see that now,” he said.
News Corp. shares rose 79 cents, or 3 percent, to $25.68 on the New York Stock Exchange, while shares in Fox Entertainment Group Inc., which holds News Corp.’s film and TV assets, rose $1.14, or 6 percent, to $19.87 on the NYSE.
Even Karmazin, who has a reputation for being eternally bullish, said Viacom had no choice but to take a bearish view, given market uncertainty and the likelihood of more preemptions of commercial programming for news in the coming months.
He said Viacom expects about $200 million in costs in the third quarter related to the attacks, with about $85 million in lost advertising revenues at its CBS television network. Viacom’s best guess for fourth-quarter costs related to the attacks was $300 million, he said.
The company’s TV stations group had lost about $40 million in ad revenues in the third quarter, he said.
Karmazin noted, however, advertisers that were initially gunshy about advertising in the immediate wake of the attacks had now returned to the market.
Viacom shares gained $1.56, or 4.6 percent, to $35.50, and Disney stood up 87 cents at $18.90 on the NYSE.
REBOUND IN 2002?
On the other hand, USA Networks Inc. CEO Barry Diller, one of the more bearish media moguls, said that the market had a chance of recovering before the end of 2002. He originally expected no recovery until 2003.
He noted that only 14 percent of the company’s revenues came from advertising. Shares closed down 2.6 percent, or 49 cents, to $18.17.
Top U.S. radio broadcaster Clear Channel Communications Inc. said it stood to lose as much as $45 million to $50 million from lost revenue. Shares closed at $33.33, down 17 cents on the day.
COMCAST UPS DIGITAL VIEW
On the bullish side, cable operator Comcast Corp. increased its expectations for 2001 digital cable subscriber additions to 2.3 million from 2.2 million. It also backed its earlier guidance of 2001 cable cash flow growth of 12 percent to 13 percent on revenue growth of 10 percent to 12 percent.
Cable operators were punished over the summer, after some companies reported a slowing in growth for advanced services like digital cable and high speed data. But Comcast president Brian Roberts said, “We’ve seen no evidence of any decline in demand for these services.”
Rival operator Cox Communications Inc. said it stood by its guidance of 1 percent growth in its basic cable subscribers for the year, although it lowered this figure in July from a range of 1.5 percent to 2 percent.
MCGRAW HILL FALLS SHORT
McGraw-Hill’s stock fell $6.40, about 11 percent, to $50.50 on the NYSE, where it was the among the biggest percentage losers.
McGraw-Hill, the publisher of BusinessWeek magazine and operator of financial information firm Standard & Poor’s, said on Monday that its third-quarter and full-year earnings would fall short of expectations.
On Tuesday, the company said it expected to return to its goal of double-digit earnings growth in 2002, but warned it would continue to face tough conditions ahead, especially for its media business.
In Europe, France’s Havas Advertising, too, spooked investors with a worse-than-expected outlook that, along with heightening fears of a recession, hammered the stock.
Havas was among the biggest losers in Europe with its shares falling 17 percent to a new low of 5.38 euros, after the company cut its operating profit margin goal. The stock pared losses to close down at 5.69 euros.