Tough times continue for some of the world’s biggest media companies.
This past week has already seen poor results for such well known names as The New York Times Company, which lost money in the first quarter, and US TV and film giant, NBC, which saw earnings fall overnight.
As well, two struggling groups, Canwest Global, the parent of Ten Network in Australia, and Independent News & Media, the UK parent of APN here, both received more time from anxious creditors to negotiate to remain alive.
Several other small media groups in the US have reported poor results as classified and TV ad income slumps by 40%-60%
Now Rupert Murdoch’s News Corp has seen its 3rd quarter results downgraded by a leading US broking analyst.
News is due to report third quarter results on May 6 (May 7 here) which could see a 45% slump in net earnings, according to research from media analysts at UBS in New York.
They said this would come on a 14% fall in revenues, which if it happens, would be the most worrying development as it would indicate the company’s sector and geographic diversity is now working against it.
News Corp shares shrugged off the downgrade with a 36c, 2.99% rise to $12.39 on the ASX yesterday That’s just under $US9 a share.
If News was to report a result around this level, then it would be in the same ballpark as NBC, which revealed a 45% drop in third quarter earnings on a 2% rise in revenues.
News would be better than The New York Times Co and Media General, both of which have reported quarterly losses (MediaGeneral has 19 local TV stations as well as a clutch of city and local papers) and Gannett, America’s biggest newspaper group reported a 60% decline. McClatchy, another newspaper group, reported a loss Thursday night.
Media analysts at UBS in New York say News Corp’s facing another rough quarter and management will have to "address earnings guidance" which sees a 30% drop in earnings for the June year.
They also warned that news could be in for a tougher time for much longer, especially as its newspapers and TV businesses face continuing weakness.
"We believe that investor expectations for ad revenues are at pessimistic levels and that signs of stability (i.e., a slowing rate of decline) would be viewed positively.
"However, we remain cautious as 1) we believe that ad sales declined at a greater rate in F3Q09 than F2Q09 and 2) that ad sales will remain at depressed levels for a longer period than current estimates imply.
"We expect that TV and Newspaper ad sales declined further in F3Q09. We forecast a 20% decline at the FOX Network and a 45% decline at stations compared to ~10% and 35% (ex-political), respectively, in F2Q.
"We forecast a 20-25% decline in newspaper ad revenue across the U.K., U.S. & Australia. We estimate a 33% decline in Sky Italia revenue (23% organic) due to promotional & F/X impacts.
"We estimate revenue declined 14.5% to $7.49bn and operating income declined 45.6% to $782mm, led by weaker television and newspaper ads. We forecast EPS of $0.13 vs. $0.38 in F3Q08, with additional pressure from equity investments in European pay-tv.
"Management should address current guidance, which calls a 30% decline in annual operating income (vs $.5.13bn base, UBSe -32%).
"News Corp’s relatively high exposure to newspaper and broadcast television advertising is weighing on near-term performance given cyclical weakness.
"We are also concerned about the longer-term outlook for the company as we anticipate secular declines for newspapers and television stations beyond this cycle.
"In addition, two of the company’s primary growth drivers, Sky Italia and Fox Interactive Media, are now facing cyclical challenges.
"We lack clear visibility into the company’s most promising growth drivers, its international cable networks, which also tempers our growth expectations.
"Given these concerns we rate the shares Neutral, despite the reasonable current valuation relative to historical multiples.
"The weak macro-environment and related declines in our advertising revenue outlooks have driven our expectation of significantly lower profit in 2009."
In February News surprised with a 42% fall in "adjusted operating income" for the December quarter. Revenue fell 9.4% from the December quarter of 2007.
It also reported a huge impairment charge for the quarter of $US8.4 billion, including around $US2.6 billion in the value of the Dow Jones Company, which News bought for just over $US5 billion as the credit crunch erupted in 2007.
Meanwhile Canwest Global of Canada and Independent News and Media in London won a bit more breathing space to try and avoid failing under a mountain of debt.
Canwest Global won yet another reprieve on its debt – the fourth in two months and Independent has postponed its results release for a week while it tries to win a rollover and restructure of some of its debt.
Canwest, whose previous extensions expired Tuesday, said early today, Sydney time, that it had won another two-weeks breathing space and would continue discussions with its secured lenders and a committee of its 8% noteholders. All up there’s around $C3.7 billion in debt involved
Canwest said the lenders agreed to extend the waiver of borrowing conditions until May 5, and during that period they will continue to provide credit to the owner of the Global television network, various specialty TV channels, a chain of big-city newspapers and the National Post.
Canwest has violated terms of a senior secured credit facility (with ba
