Media is not immune as stock market dives
Charter, Imax among big losersA global meltdown of financial markets caused all 30 stocks in the Dow Jones index to fall Tuesday. Media stocks fared better; of the 50 stocks that make up The Hollywood Reporter's Showbiz 50, only 49 fell.
The single Showbiz 50 holdout was Liberty Media Holding Corp. When the dust settled Tuesday, the stock was unchanged at $105.70.
The Dow Jones plunged 416.02 points, or 3.3%, which pundits are calling the worst performance since the Sept. 11 attacks sent markets reeling for several days. The Nasdaq on Tuesday dropped 96.65 points, or 3.9%, while the S&P 500 lost 3.5%.
The Showbiz 50 fell 3.7%, the biggest loser being Charter Communications, which dumped 6.2% to $3.02. Other losers included Imax Corp. (down 5.9%), the Walt Disney Co. (5.7%), TiVo (5.7%), Marvel Entertainment (5.4%), Warner Music Group (4.9%) and DirecTV Group (4.8%). Seventeen stocks on the index fell 4% or more.
Analysts attributed the swoon to a 9% sell-off in China's Shanghai Composite Index, which skeptics have been saying was long overdue because enthusiasm for that country's fast-growing economy has caused some stocks there to trade at nosebleed valuations.
"When everyone's favorite growth economy takes a 9% hit — in other words, it crashes — there will be a global contagion," said Cody Willard, a hedge fund manager who recently founded new-media entity BoomRevolution.com.
Even companies that reported good earnings results Tuesday didn't escape the carnage. DreamWorks Animation SKG, for example, recorded a fourth-quarter loss of 20 cents a share, a whopping 22 cents better than analysts had forecast, yet its shares were down 3% during the regular session and didn't recover after the bell when its results were released.
Sirius Satellite Radio and Blockbuster each reported strong quarterly earnings before the opening bell, but their shares fell 2.4% and 3.9%, respectively.
Stocks on the Showbiz 50 that performed relatively well included Acme Communications (down 1.2%), Carmike Cinemas (1.3%), Clear Channel Communications (1.4%) and RealNetworks (1.8%).
The drop in the major indexes wiped out the gains that the Dow Jones, S&P 500 and Nasdaq had amassed so far this year, though some individual media and new-media shares still show healthy gains for 2007. Blockbuster and Movie Gallery, which operate in a sector some investors have long written off, are up 26% and 33% on the year, for example.
In new media, Yahoo! Inc. remains up 21% on the year, while TiVo is up 14%, Napster is up 8%, and IAC/InterActiveCorp is up 7%.
As for the conglomerates, Sony Corp. is up 21% so far this year, and News Corp. is up 7%. The Walt Disney Co. and CBS Corp. are each off by 3%, while Viacom is off 4%, and Time Warner is lower by 5%.
Willard, a frequent stock-picking pundit on CNBC, said he was buying stock into Tuesday's carnage. Specifically Adobe Systems, which sunk 4.8% Tuesday. "It's the de facto standard for Internet video," he said.
Willard also likes Disney and Lionsgate Entertainment. "The prospects for content-ownership companies has never been brighter," he said. "Their addressable market is the 1.5 billion people on the Internet."
Willard's advice to media investors? "Ignore the day's noise and stick with themes that work," he said. "The dynamics of the disruption that the Internet is causing all forms of media won't change. It continues to excel."