Sky isn't falling, moguls maintain

Executives take stage at Communacopia conference

With their stocks in freefall for the second time this week, the response from media moguls Wednesday was along the lines of: What? Me worry?

DreamWorks Animation CEO Jeffrey Katzenberg, speaking along with other executives at an investor conference, set the tone early by predicting the movie industry will weather just about any economic storm.

"Both traditionally as well as recently, we have seen that our product is, at worse, recession-resistent and, more optimistically and historically, has actually been recession-proof."

As the CEO spoke, the Dow was well on its way to Wednesday's 450-point decline. And that 4.1% drop made it the best-performing index of the day. The S&P 500 and Nasdaq were off 4.7% and 4.9%, respectively, while The Hollywood Reporter Showbiz 50 index dumped 5%.

Echoing Katzenberg's optimism in various ways were News Corp. CEO Rupert Murdoch, Time Warner CEO Jeffrey Bewkes and CBS' Leslie Moonves.

Ironically, the executives were speaking in New York at the Communacopia conference hosted by Goldman Sachs on a day when the venerable Wall Street firm saw its own stock sink 14%, its steepest one-day decline in history.

The Eye's president and CEO Moonves even turned the tables on one of the Goldman analysts as they sat down for their fireside chat. "Interesting week to be here," Moonves quipped. "Can I ask you a question?"

Turnout at the event didn't seem much affected by the current mayhem on the Street: Several attendees said they welcomed the opportunity to get away from their offices, the trading floors and/or their Bloomberg terminals.

Murdoch, who has been criticized for buying publisher Dow Jones when newspapers are out of favor, promised he is not planning further acquisitions of papers, not even, as has been speculated, the New York Times. The News Corp. chairman added he is unlikely to make a big deal as long as the economic outlook remains "murky."

In contrast, Time Warner president and CEO Jeffrey Bewkes told The Hollywood Reporter that a weak economy and the current market turmoil could create buying opportunities.

In his conference appearance, Bewkes reiterated that TW would look for acquisitions in core areas, such as film and TV production businesses, U.S. and international TV networks and maybe magazine brands.

He didn't mention specific companies, but drew laughs when he quipped: "I rule out the acquisition of subprime mortgage debt."

Several media heavyweights discussed the state of the ad market, with Murdoch predicting News Corp.'s TV stations and newspapers would gain market share from weaker competitors.

"Hard times are good for big companies," he argued.

Murdoch cited the Wall Street Journal and his online assets as looking like they could surprise investors with their performance in a sluggish economy.

He acknowledged, though, "the local television market in this country is bad," specifically noting sharp declines in auto ads.



Also addressing advertising, Moonves said that "financials are down, but not as much as auto."

He said Bank of America is a bigger ad buyer than Lehman Bros., parts of which are being sold to Barclays, and Merrill Lynch, which is being acquired by BofA.

"It's a good week for us -- just kidding," joked Moonves.

Like Murdoch, Moonves promised that CBS would emerge from the economic slump better than ever. "We're vastly undervalued," he said of CBS' shares. "We're so prepared when the economy turns."

Goldman analysts said in a report previewing their conference that the economy continues to weigh on media stocks, which have been depressed all year. "Investors will keenly watch for signs that revenue may stabilize," the report said. "Stocks in the group tend to bottom several months ahead of their earnings and of the broader business cycle."

Moonves and Murdoch also bragged of not seeing a high number of ad cancellations on their networks and said ad rates in the scatter market have continued to hold up well.

And Bewkes noted that a weak economy has not had an effect yet on Time Warner's financials.

After the planned spinoff of Time Warner Cable, TW's revenue sources are roughly: 40% content sales, 35% subscriptions and only 25% ad sales, he said.

The first two revenue streams have "for decades not been particularly sensitive to economic slowdowns," Bewkes said.

Two areas of economic challenges are print ads and AOL's display ad and third-party ad business, he said.

Asked by THR if News Corp. will manage its finances differently because of the crisis, Murdoch said he saw no need to change anything.

"You couldn't be more conservative than us," he said. "We have our cash in T-bills."

Along those lines, Time Warner CFO John Martin told THR that "our balance sheet is in great shape. We have low leverage."

Martin also said the company's film financing approach would not be negatively affected by the downfall of investment banks.

"We have consistently taken a diversified approach to financing movies," he said.

Kicking off the conference was Barry Diller, sounding very bullish about the ad prospects for his online assets.

"We're so early in this Internet process of what we have historically called advertising," the InterActiveCorp chairman and CEO said.

Diller predicted that Internet advertising will look increasingly like like the television model, including video ads that interrupt programming, as opposed to just the pre- and post-roll variety.

Georg Szalai reported from New York; Paul Bond reported from Los Angeles.
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