Season's beatings for new media in Dec.


Concerning Wall Street's view of media, it was out with the new and in with the old last month.

While shares of the more traditional movie retailers Blockbuster Inc. and Movie Gallery Inc., for example, surged 34.9% and 23.9%, respectively, during the holiday month of December, their new-media counterpart, Netflix Inc., saw its shares tumble 11.7%.

The stodgy old conglomerates also outperformed the more nimble growth companies, too. Time Warner shares were up 8.1% last month, while shares of the Walt Disney Co. rose 4.6% and shares of News Corp. were up 3.4%.

By contrast, shares of Yahoo! Inc. and Google Inc. dropped 5.4% and 5%, respectively. TiVo shares were off 10%.

While shares of XM Satellite Radio rose a penny during the month, shares of rival Sirius Satellite Radio sunk 16.9%, but satellite TV operators DirecTV Group and EchoStar Communications Corp. rose 9.6% and 4.2%, respectively.

Speculation is rampant that Liberty Media Corp., which will take control of DirecTV around midyear, might try to merge their new asset with EchoStar, operator of Dish Network.

New-media's funk even spread to the top makers of video games, despite predictions of robust sales fueled by a holiday gift-giving season that coincided with massive hype about next-generation consoles.

Analyst Lowell Singer seemingly nailed it when, in early December, he said he was neutral on the group, though he rated shares of Activision Inc. "outperform." They closed only 1.4% higher for the month, though outperformed Electronic Arts Inc. (down 9.9%), THQ Inc. (down fractionally) and Midway Games Inc. (down 9.8%). Shares of Take-Two Interactive Software Inc. fared similarly to Activision, rising 2.4%.

"We believe that the console transition is likely to remain volatile," Singer said. "We maintain our longer-term neutral view on the industry, but continue to rate Activision 'outperform' due to its robust upcoming release slate and its overall game quality."

Oppenheimer analyst Shawn Milne in December initiated coverage of THQ with a "buy" rating, partly because its titles for PlayStation 2 and the Nintendo DS are solid.

He also sees potential for Activision in the new year, in part because he likes the prospects for its "Guitar Hero" game and sequels to such franchises as "Shrek" and "Spider-Man."

Likewise, Bank of America analyst Michael Savner is bullish on shares of Activision and THQ, though he is neutral on Take-Two and Electronic Arts.

As for new media's more dramatic losers, TiVo hasn't helped its cause with the ongoing confusion as to when Comcast Corp. might offer the TiVo software to all of its customers. TiVo's software solution -- as opposed to its hardware solution -- is considered a huge step for the company that introduced DVRs to the masses.

"We still think the market will give TiVo some leeway as it sorts out its strategy, keeping the shares' valuation largely intact," FBR Research analyst Brian Coyne said. He has a $6 price target on TiVo shares, which closed the month at $5.12, six cents shy of where they started the year despite a couple of spikes past the $8-mark at about midyear.

As for Netflix, its shares could remain volatile, some observers said, as the DVD-by-mail company gets set to roll out plans as to how it will deal with digital-download technologies that allow for movies delivered on-demand.

Bank of America analyst Brian Pitz initiated coverage of Netflix last month with a "sell" rating and $24 price target. Shares closed the month at $25.86.

Among his concerns is that the $40 million Netflix has earmarked for spending on its digital-download solution this year might prove insufficient.

The problem for Sirius shares appear a bit more simple. The company said in early December that it would close the year with about 5.9 million-6.1 million subscribers, less than the 6.3 million it had been forecasting.

Upon the new guidance, Miller Tabak & Co. analyst David Joyce cut his rating from "buy" to "neutral" and his price target on Sirius shares from $5.50 to $5. They closed the month at $3.54.