5 Lessons From Showbiz Earnings Season

Courtesy of Warner Bros.

Advertising stays solid, DVD and digital trend upward, and Disney takes a hit.

1. The Economy Hasn't Hurt Hollywood … Yet
With markets on a wild ride, studio stocks have all been hit in August. But in the second quarter (covering March to June), all-important advertising trends have remained solid. "We're seeing increased [advertiser] demand for our shows," said CBS Corp. president and CEO Leslie Moonves in announcing stronger-than-expected revenue amid ad-pricing strength. Notes Morgan Stanley analyst Benjamin Swinburne: "National ad trends remained strong -- up 10 percent-plus year-over-year across the group, and commentary on forward demand was encouraging."

2.  … But Pay TV Is
Losing Subscribers Pay TV operators had a rough second quarter, citing the weak economy and heated competition as reasons for what is expected to be the biggest quarterly subscriber declines ever. What's more, satellite TV saw its first-ever sub decline. "A resurrection of the cord- cutting thesis seems almost inevitable here," says Sanford C. Bernstein analyst Craig Moffett.

3. Rare Good News for Home Entertainment
The DVD and Blu-Ray market has remained sluggish, but Time Warner reported a rare 29 percent home entertainment revenue gain, driven by Harry Potter and the Deathly Hallows Part 1. Viacom posted a 33 percent revenue gain in the division thanks to such titles as True Grit and Justin Bieber: Never Say Never, and Sony improved thanks to The Green Hornet and Battle: Los Angeles.

4. Surprise! Digital Revenue Appears
Who says nobody makes money with content on the Internet? Several moguls highlighted the recent windfall from library licensing deals with digital distributors. Says Nomura analyst Michael Nathanson, "Viacom, CBS and Comcast handily beat expectations in part due to the high-margin flow-through of new deals with Netflix and/or Hulu."

5. A More Modest Mouse
Disney slightly underperformed Wall Street expectations this quarter, especially when excluding ESPN deferred revenue that analysts had expected would come in later. The film unit -- where Thor and Cars 2 didn't match up to last year's Toy Story 3 and Iron Man 2 -- was the conglomerate's only division to see revenue decline (1 percent) as film operating profit fell 60 percent. Wunderlich analyst Matthew Harrigan cut his stock rating from "buy" to "hold" and his price target from $42 to $39, citing studio guidance that he says was "less than magical." On Aug. 10, Disney shares hit a 52-week low of $29.60.