Outlook for US Media and Entertainment Industry Worsens
The outlook for the media and entertainment industry has become even bleaker in recent months, says Standard & Poor’s Ratings Services, as expected higher ad spending in 2008 from the presidential election and Olympics failed to overcome plummeting non-political ad spending.
The softening U.S. economy is to blame for weaker ad sales, with S&P Ratings forecasting a 1 percent rise for 2008 and a scant 0.9-percent increase for 2009. Ad sales rose 0.4 percent in 2007.
Even online advertising has been experiencing a marked deceleration, despite surging past magazine advertising in 2006 and likely past radio advertising in 2008. Challenges are multiplying in the industry as the U.S. economy edges closer to a recession, financial market turmoil continues and consumers tighten spending in ways we had not envisioned.
S&P warns that companies that executed LBOs in the past three years are laboring under particularly onerous debt loads, resulting in more downgrades than upgrades in 2008.
Among S & P’s findings in the media and entertainment segments:
- Broadcast and cable network advertising has remained relatively healthy but the slowing economy is pressuring TV broadcasters.
- Radio advertising declines are accelerating, with local ad revenues falling 7 percent in the second quarter.
- Internet advertising is growing, but at a slower rate than in 2007.
- Magazine advertising suffered its biggest decline in several years, with drug and remedies ads and automotive ads each falling more than 20 percent.
- Newspaper revenues and cash flows will continue to decline in 2009, with five of S&P’s nine rated newspaper companies in the ‘CCC’-rated category, indicating a near-term liquidity threat.
For details, see “Industry Credit Outlook: Local Ad Spending Under Siege in U.S. Media & Entertainment Sectors,” and “U.S. Media and Entertainment Companies: Strongest to Weakest.”
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