Entertainment Stocks Crushed Again

Illustration by: Lars Leetaru

In just 16 days, Disney shares have dropped 18 percent while Viacom's have plunged 21 percent.

Media and entertainment stocks fell hard again on Thursday, underperforming broader markets that also took a beating.

While the Dow Jones Industrial Average dropped 358 points Thursday, or 2.1 percent, Walt Disney and Viacom each fell 6 percent; Time Warner was off 5 percent; Sony and 21st Century Fox each fell 4 percent; Comcast was off 3 percent; and CBS dropped 2.5 percent.

Stocks in the media and entertainment sector have been sinking since Disney and others warned of slower growth for cable networks as an increasing number of U.S. consumers choose to scale back their pay TV habit, or drop it entirely.

Since August 4 when Disney reported its quarterly earnings, the conglomerate's stock has sunk 18 percent, a nearly unprecedented amount in only just 16 days. In the same time frame, Viacom is off 21 percent; Time Warner and Fox are each down 16 percent; CBS is off 13 percent; and Comcast is down 7 percent. Even Sony, which doesn't have a cable-networks business, is down 7 percent.

While media and entertainment have been suffering in August, Netflix was holding its own — not surprising since streaming is growing fast as traditional pay TV stagnates — but on Thursday its stock dropped 8 percent, wiping out all its recent gains.

While the sector didn't need another catalyst beyond cautious remarks from executives during conference calls to discuss earnings, it got another one on Thursday in the form of an unusually bearish research note from Bernstein analyst Todd Juenger.

"The market is now valuing U.S. ad-supported TV businesses as structurally impaired assets," Juenger wrote. "We believe this is fair and warranted, because: a) we believe TV advertising is undeniably in secular decline; and b) affiliate fees are now also being put at increased risk."

In fact, no media-entertainment stock, big or small, was immune to the carnage on Thursday. Some of the other victims were: DreamWorks Animation, AMC Networks and Discovery Networks (each down 5 percent Thursday); Imax (off 6 percent); and Dish Network and Lions Gate Entertainment (each down 4 percent).

In new-media, Facebook dropped 5 percent, Twitter was off 6 percent, Yahoo was down 3 percent and Google was down 2 percent. Game stocks also took it on the chin, with Take-Two Interactive Software and Activision Blizzard each sinking more than 3 percent.

Email: Paul.Bond@THR.com