Global cooling has media firms wary

Rallying U.S. dollar could hurt overseas boxoffice

NEW YORK -- There's been some red, white and blue pride over the dollar's recent rally, but the greenback's strengthening is traceable to a growing sense that the global economic decline will be worse overseas than in the U.S.

That could be bad news for Hollywood and the media conglomerates who own the studios. The same U.S. entertainment groups that have been touting their geographical diversification soon might start feeling a big pinch from an even bigger slump in the already-slack worldwide ad market.

"Media stocks (with) European exposure have been under pressure," Miller Tabak analyst David Joyce said.

Virgin Media, British Sky Broadcasting and Liberty Global are among those struggling, and weaker consumer spending could spread the pain to the cable TV sector, Joyce added. "A weaker economy equals less consumer discretionary income equals less propensity to upgrade to higher-speed Internet tiers and digital video packages," he said.

Similarly, Merrill Lynch's North American economist David Rosenberg recently wrote about economic contraction in such key foreign markets as Japan, German, France, Italy and to a less extent the U.K.

All of this comes on top of a U.S. economy suffering from lower consumer spending and weak local ad trends. So sector biggies Viacom, NBC Universal and News Corp. will be hard-pressed to find release anywhere in the global portfolio of businesses.

Viacom has seen ad growth at its U.S. cable networks slow to 1% in the second quarter. That compares with 10% at its international channels -- for the present.

Continuing gains by the U.S. dollar also could mean studios no longer will see their foreign boxoffice receipts artificially inflated by stronger overseas currencies.

The weak dollar also has prompted foreign vacationers waving cheaply exchanged dollars to flock to U.S. theme parks. International visitors to Disney's theme parks, which have held up well amid a weak U.S. economy, also could start staying away soon now that their home economies are slackening and their local currency isn't worth as much.

And don't look for any silver lining in the situation.

"A weak dollar makes for larger revenues and profits as translated from overseas DVD and boxoffice," said Harold Vogel, a longtime industry analyst and president of Vogel Capital Management. "But most of the industry's costs are here (in the U.S.). So there is no large cost relief from a stronger dollar."

Wall Street insiders will be listening closely to Rupert Murdoch and his team at News Corp. during the coming months for signs of weakness in the company's worldwide operations. News Corp. is the most globally diversified sector giant.

Murdoch has touted the firm's global presence as a key defense against a weak U.S. economy. But if the global contagion continues, that defense might turn out to be much less effective.