Media investors remained confident

Even as worries about the economy grew, media investors remained confident in the first half of this year: Returns on media stocks were almost three times greater than those for the larger market.

Giving media stocks a boost: continuing gains in advertising, new digital deals, perceptions of a looser regulatory climate and diminished fears over cord-cutting in the first two quarters of 2011.

Media stocks returned 11% to shareholders, according to the Bloomberg Media Index, vs. 4% for the Standard & Poor’s Index. The Bloomberg Index measures 36 stocks across all sectors of the biz.

The big winner was CBS, with a 42% return. Topper Leslie Moonves’ loud championing of the Eye’s new revenue stream through retransmission fees appears to have been heard loud and clear on Wall Street. Moonves has said those fees could top $2.5 billion in the next several years. In addition, CBS saw the largest dollar commitment from advertisers during the spring’s upfront sales, north of $2.5 billion.

Netflix matched CBS with a 42% return, as the streaming service announced it had more than 23 million subscribers, putting it on par with Comcast, the nation’s largest cable company. CEO Reed Hastings continued to preach that he is an ally of Hollywood, not a competitor, even as Netflix moves into its own original programming.

Not surprisingly, Sony Corp. posted the worst performance, with its shares falling 29% in the first half, largely on the hit it took from the devastation of the Japanese tsunami and earthquake in March. The company was forced to close several plants. Sony shares were not helped by a scandal that involved hackers stealing personal information from its PlayStation Network in April.

DreamWorks Animation continued to see its stock plummet, dropping 27% in the first half. Tepid sales of “Megamind” (not to mention a disappointing box office) and the fourth “Shrek” installment on DVD soured investors on the company. Still, DWA is counting on “Kung Fu Panda 2″ and “Puss in Boots” to trigger a rally in shares in the second half.

But Sony and DreamWorks were the rare laggards among media giants. “What you are seeing is companies harvesting gains from the steps they have taken in the past several years coming out of the recession,” said Tuna Amobi, an analyst with Standard & Poor’s. “That’s everything from restructurings to striking new digital deals.” He did point out that in the last several weeks, as more ominous macro-economic data was released, media stocks were a bit more “choppy,” but he believes they will continue to outperform the broader market in the second half. “You will see some speed bumps,” he said.

One of the companies that could be in for a rougher second half is Disney, as rising oil prices deter travelers from heading off to theme parks. Disney’s shares were up 2.5% in the first half.

In terms of big deals making investors nervous, Comcast put that notion to rest, as it won regulatory approval that some thought it might not gain under a Democrat-dominated FCC. Its shares were up 11% in the first half, after closing its joint venture with NBCUniversal in January and despite spending big to retain the rights for hockey and the Olympics.

The prize for the best comeback in the first half of the year goes to Discovery Communications, whose shares ended up essentially flat after a 5% decline in the first quarter on worries that its joint venture with Oprah Winfrey, cable net OWN, is not living up to expectations. Investors are obviously anxious for Oprah herself to debut on her own network later this year and to see if viewership spikes.

The big test for many media outfits in the second half will be convincing advertisers to keep spending as talk of a double-dip recession grows louder — sending jitters through Madison Avenue and up the spines of more than few moguls.

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