NBC may broadcast “The Biggest Loser,” but in terms of 2007 stock price performance, Time Warner ran away with that title.
Of the big five entertainment conglomerates – CBS, Disney, News Corp., Time Warner and Viacom – only Viacom managed to post a share price increase this year, as uncertainty over the impact of digital delivery of content and a weakened advertising environment due to a weak economy dampened investor enthusiasm for the space. (NBC is part of General Electric and doesn’t trade on its own merits like the other companies.)
Time Warner took the largest broadside from jittery investors, with its stock price shedding 23.46 percent of its value during the year. It closed yesterday at $16.67.
While the company was hammered for everything from its perceived reluctance to detail a succession plan – which it finally announced in November – to the disappointing performance of AOL, it was the cable unit that caused the most anxiety for investors.
According to Miller Tabak analyst David Joyce, investors are uncomfortable with Time Warner Cable accounting for roughly 40 percent of the parent company’s $94.4 billion enterprise value at a time of increased competition from satellite and telecom providers as well as intense pressure from the Federal Communications Commission.
CBS didn’t perform much better than Time Warner, with its stock closing trading yesterday at $26.95, down 13.57 percent for the year.
Part of the blame for CBS’ issues lay with Chairman Sumner Redstone’s decision to split the company off from Viacom two years ago.
Joyce said that CBS suffered from its businesses being highly advertising focused and therefore not diversified enough to weather the year’s economic downturn.
“CBS is the one entertainment company most highly correlated with the economy, and when that gets hurt like it did this year, the first thing it affects is local advertising, which is the core of CBS’ business,” Joyce said.
Viacom, however, didn’t suffer the same fate as CBS, because it is more diversified.
The home of MTV, VH1 and other cable networks produces revenue not only from advertising, but also from fees paid by cable operators to carry the channels, and as such was the only entertainment outfit to post a stock price gain in 2007.
Viacom shares closed at $43.70 yesterday, for an annual gain of 6.56 percent. Viacom had improved ratings at its cable networks and a turnaround at movie studio Paramount Pictures.
Rounding out the big five are Disney and News Corp., where shares in both companies ended the year below where they started. (News Corp. owns The Post.)
Disney shares closed at $32.43, off 4.09 percent for the year, while News Corp. ended the day at $21.50, down 3.41 percent on the year.
The analyst said News Corp. was the most active portfolio manager in the sector, buying things like Dow Jones while jettisoning television stations, its interest in Gemstar and other assets.
If anything, Joyce said News Corp.’s balance sheet might be too strong. “They are sitting on a pile of cash,” he said.
Heading into 2008, Joyce said he expects entertainment stocks to continue to be pressured until it becomes clear that the economy is coming out of its slowdown.