Dow average rises amid bailout optimism

Although the bipolar mood-swinging stock market climbed nearly 500 points Tuesday, the shockwaves from the financial crisis continue to resonate throughout the media and entertainment biz.

Some of Tuesday’s biggest gainers included Viacom, up 5% to $24.86; Regal Entertainment, also up 5% to $15.78; and Disney, up 3% to $30.69.

Despite the upswing, many segments of showbiz are on edge as the ongoing tightness of the credit market is affecting a range of players. Certainly no major new round of dealmaking seems doable for anyone in the immediate future; those seeking financing — including MGM and Sirius XM — have struggled in this climate.

Anyone depending on travel dollars combined with discretionary entertainment spending — namely, those with Broadway shows or theme parks — is waiting anxiously to see whether the malaise bleeds into the holiday season.

Ditto for the beleaguered homevid biz, which finally lined up behind one high-definition DVD format, Blu-ray, just in time for the financial meltdown. Prices for basic Blu-ray players are expected to drop to around $249 this Christmas but that may be $249 more than a lot of households want to spend.

Tuesday’s upbeat trading reports interrupted a two-week stretch of grim headlines, starting with the collapse of Lehman Bros. and the buyout and government rescue of Merrill Lynch and AIG, respectively.

But aside from tight credit markets and looming questions about media congloms’ financial maneuverability, rising unemployment, declining housing prices and the uneasiness of all of the financial upheaval is adding additional pressure.

After posting its biggest point drop in history Monday, the Dow Jones Industrial Average, which posted its biggest point drop in history Monday, gained 485 points Tuesday, or 4.7%, on growing expectations that Congress will figure out a way to pass some form of bailout relief for ailing banks and Wall Street institutions. The House’s rejection of the Bush administration’s proposed $700 billion bailout package Monday sent stocks into a tailspin and the Dow to a 777-point plunge.

Shares of the top showbiz congloms are trading near 52-week lows, and while there is plenty of evidence that much of their core business is recession-resistant, the current media landscape has never been put to such a test. This is not the single-screen theater or three-network TV world being subjected to financial turmoil — it is a digitized, 100-channel, Internet-fueled, ancillary-dependent world now, and it’s hard for anyone to feel immune.

Pay-TV nets, for example, are likely to get squeezed a bit, as are cable and satellite providers, not to mention nascent telecom TV efforts. Consumers will be cocooning and watching as much TV as ever, but the notion of a $100-a-month bill for tiered services may well come under new scrutiny.

“The bad economy is a real incentive for people to seek out bundles from cable operators,” said Chris Marangi, a cable analyst for Gabelli Partners, a major media investor. Technology has made the bundling of cable TV, Internet access and telephone service an increasingly attractive selling point.

Marangi said that if subscribers are looking to “tighten their entertainment budgets, they’ll go out to fewer movies and not eat dinner out as much.” When looking to save on their cable bills, people will “down-tier,” as Marangi puts it, meaning that they’ll cancel the services that cost extra money but are not essential, like pay-TV networks.

But cable TV has become such a “quasi-utility,” he said, that people are not likely to drop it entirely. Indeed, shares in the nation’s largest cable operator, Comcast Corp., rebounded 9% on Tuesday to close at $19.63, after sinking 13% in Monday’s bloodbath.

It is too early to make pronouncements about how the financial crisis will affect what ends up onscreen, but film, TV and the stage are all likely to be shaped by 2008 if it is the entry point to a prolonged financial funk.

One self-proclaimed “safe harbor”: pro wrestling. World Wrestling Entertainment issued a press release Tuesday noting that the 9.4 % dividend yield on WWE stock is 300% higher than the S&P average. WWE shares were up 1.8% on Tuesday to close at $15.46.

“Given its strong balance sheet and cash generative businesses, WWE feels confident it can fund the dividend for the long term,” the company said.

You know these are unusual times when Vince McMahon is presenting himself as the safe investment alternative.

(John Dempsey contributed to this report.)

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