Prepping the Street

Analyst lays out odds, scenarios of strike

NEW YORK — As writers and actors make threatening noises in Hollywood, Wall Street has started concocting its own numbers to held guide investors in the event of a strike this spring or summer.

Entertainment analyst Scott Davis of First Union Securities figures there’s a 25% chance there won’t be a strike. It’s much more likely, a 50% chance, that a strike occurs but lasts less than three months, with the financial impact too small to notice.

Moderates will prevail

“After some of the more militant members of the guilds get their moment in the spotlight, it seems likely that cooler heads would prevail and a strike would not last more than a couple of months,” he said Thursday in a note to clients.

The third, most dangerous scenario, is a strike lasting longer than 90 days. His odds there are 25%. Network television would be the hardest hit. Stations would suffer, but less than nets, and cable might benefit from a broadcast migration. For a time, movie studios could even show improved financials given the cost of producing and marketing pics and new accounting rules.

Long strike dire for exhibs

Studios have enough product to last until spring or early summer 2002, Davis said. But if a strike lasts long enough to cause a hole in the release schedule, “the falloff in product would be near complete.” That would be dire for struggling theater owners.

He noted that, on average, film makes up only about 5% of the cash flow for the big media congloms.

After several months of strike, TV nets would be forced to air alternative programming. Nets with more reality shows and those attached to big movie libraries would win out. General Electric-owned NBC has the most to lose on both counts, he said.

From an investment perspective, giant AOL Time Warner is the least exposed, he said since the WB net is like “a pinky toe on an 800-pound gorilla.”

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