Crash course

Media stocks on hit list in worst market meltdown since 9/11

A sell-off in the market took down media stocks along with the broader indices Monday during the worst day on Wall Street since the 9/11 attacks. Skittish investors mostly were reacting to a shakeout in the financial sector, which saw two banking behemoths, Lehman Bros. and Merrill Lynch, essentially bite the dust. The fate of a third storied institution, insurance giant AIG, hangs in the balance and kept the trading session on tenterhooks throughout the day.

The Hollywood Reporter Showbiz 50 index hit a 52-week low and one of its lowest points since its launch in early 2006 as only one of its 50 components advanced amid a sharp global sell-off.

Among others, shares of Cablevision dropped nearly 12%, Sirius XM hit a multiyear low, and Viacom briefly touched a 52-week low.

The free fall of stock markets worldwide came after a bankruptcy filing from Lehman and a rushed sale of Merrill Lynch to Bank of America reached during a weekend that saw Wall Streeters grow increasingly nervous. Their jitters come after 14 months of grappling with a credit crunch and trying to clean up an increasingly toxic subprime mortgage mess.

Amid wide-ranging turmoil among financial-services giants and a growing conviction on the Street that more of them could be taken out, mergers and acquisitions activity likely will be chilled.

"It does take deal speculation out of stock valuations," Miller Tabak analyst David Joyce said about the market trends.

Case in point: Cablevision, whose shares were pummeled Monday after having been partially bolstered by investor hopes that the controlling Dolan family will sell off at least part of the company, most likely its cable networks unit.

"Aggressive M&A activity doesn't tend to happen in short-term, focused, volatile markets," said John Fargis, managing director and U.S. media investment banking head at Jefferies. Especially private-equity firms, which until last year dominated most sector auctions, remain pretty much shut out of the M&A market because of the weak state of the debt markets, he explained.

But Fargis also expressed hope that some potential dealmaking could emerge. "If markets like this create buying opportunities, then the result could be more activity," he suggested.

U.S. markets on Monday saw their sharpest declines since 2001: The broad-based S&P 500 index was off 4.7%, and the Dow lost 4.4% — more than 500 points.

The dark clouds dragged down the Showbiz 50 stock index 3.5% to 1,006.59 on Monday after it hit an intraday low of 944.97. That undercut its previous 52-week low of 1,002.25.

Liberty Interactive's Class B shares, which are part of the index, were the only gainer, advancing 1.3%. However, the firm's Class A shares, which are not part of the Showbiz 50, declined.

Meanwhile, General Electric, the parent company of NBC Universal as well as the maker of jet engines and MRI machines, slipped $2.15 to a five-year low of $24.60.

It was a similarly dramatic story abroad.

London's FTSE 100 index hit its lowest level of the year, closing down 4% to 5,204. The U.K.'s biggest decliners were in the banking and insurance sector, but media stocks sank with the rest. Among the hardest hit was commercial broadcaster ITV, whose stock fell 5.9% as investor hopes of a takeover took a buffeting. News Corp.'s satellite TV giant British Sky Broadcasting finished down 1.7%.

Markets in Germany also were sent reeling from the news of Lehman's collapse. The benchmark Dax index briefly dropped to its lowest level since October 2006, and media shares didn't escape unscathed. KKR/Permira-controlled broadcaster ProSiebenSat.1 dropped 7%, and pay TV group Premiere, in which News Corp. is the largest single shareholder, shed 5.7%. Luxembourg-listed broadcaster RTL, controlled by Bertelsmann, only declined 1.2%.

In Italy, shares of Silvio Berlusconi's commercial broadcaster Mediaset lost 2%.

Asia's largest stock markets in Japan, South Korea and Hong Kong were closed for a holiday Monday, but the first two opened down 4% and 5%, respectively, on Tuesday.

In India, the Bombay Stock Exchange declined, closing at its lowest level in two months.

Shares of movie company Adlabs Films, the owner of India's largest cinema chain, closed down 10%, also hit by Saturday's wave of bombings in New Delhi that closed cinemas and ate into weekend boxoffice revenue.

Eros, the largest purveyor of Indian films overseas, lost 7% on the London Stock Exchange.

Mimi Turner in London, Scott Roxborough in Cologne and Jonathan Landreth contributed to this report.