3rd quarter lineup

Time Warner to kick off media titans' reports

NEW YORK — Third-quarter earnings season begins in earnest this week, as the major media congloms offer up their latest fiscal tallies and presumably tender a few clues on the health of their businesses for the balance of the year and beyond.

Few big surprises are expected when a rechristened Time Warner kicks off the reviews Wednesday, followed by Viacom on Thursday and Fox and Disney in early to mid-November. But investor ears will be closely tuned to indications of just how healthy the uneven TV ad market is, along with a final reckoning on an overall bland summer box office. Time Warner is widely expected to show the weakest year-on-year performance.

The Mouse House, on the other hand, is prepping to turn in another bravura B.O.-fueled report thanks to “Pirates of the Caribbean: The Curse of the Black Pearl,” “Spy Kids 3D: Game Over” and “Freaky Friday,” not to mention a bountiful video/DVD slate.

Viacom, meanwhile, may have to fess up to a less-than-stellar filmed entertainment performance and some iffy local advertising indicators while focusing investor attention on 2004 TV ad prospects and its cable nets.

Viacom-owned MTV and BET are expected to reveal solid gains in the 18-49 demo for the quarter, while Nickelodeon has been flat.

Par slippage

Most investors have already factored in an expected slide at Viacom’s Paramount division, which is likely to suffer the double whammy of a weak summer box office (“Lara Croft Tomb Raider: The Cradle of Life”) and minimal homevid/DVD releases compared with a year ago.

Over at Time Warner, filmed entertainment may suffer a bit from higher spending on its hefty TV production fall slate, and weaker homevid/DVD lineup, while the music division could show at least an 8% quarterly decline in sales.

Warner Bros., which had only middling success with “Matchstick Men” and “Secondhand Lions,” faces tough comparisons with last year’s “Austin Powers”-fueled quarter.

Investors also are bracing for the AOL division’s report on subscribers; it may have lost as many as 800,000 dial-up customers worldwide in the three months ended Sept. 30.

Fox, reporting its fiscal 2004 first quarter, should be able to offset an only mediocre third-quarter box office run with heady DVD/video sales of “Phone Booth” and “Daredevil.” Fox will be touting healthy early showings for “Nip/Tuck” on FX along with the continued strength of the Fox News net at rival CNN’s expense.

Stationary situation

Fox stations group, which has exploited most of its big cost savings from its TV duopolies, is expected to show only marginal revenue growth, with profits more or less flat vs. last year.

The market will be paying close attention to the health of the local and national TV ad market, which seems to be flagging recently. Bank of America securities analyst Doug Shapiro noted that the networks continued to lose share to cable over the summer, with most nets posting lower ratings in the September quarter compared with the same period last year.

Media buyers say ad pricing has weakened in the last two months to levels at or even slightly below upfront levels. That’s making many investors nervous, including Soundview Technology analyst Jordan Rohan, who last week downgraded his outlook for Viacom, citing concerns about the weakening national ad market in broadcast and cable TV scatter, and national radio.

Critically, advertisers over the next several weeks have the option of canceling up to 30% of their upfront commitments for the first quarter of 2004.

Analyst Richard Greenfield of Fulcrum Global Partners expects a key theme in company conference calls will be weakness in advertising at the local level (due to tough comparisons with last year, which benefited from political ads), with most companies trying to divert investor focus to 2004, which will feature the Summer Olympics and the presidential election.

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