Mixed media marks

Bottom line: Better ad sales, poor pic perf

NEW YORK — March earnings announcements are due in the next three weeks. Call it the first ritual purge of the fiscal year.

Wall Street seers expect moderately healthy results from the major congloms, thanks to a slightly rejuvenated TV ad sales market in the last three months and a rebound from the same period last year, which was overshadowed by the war in Iraq.

But the first quarter wasn’t a robust one for media stocks on the big board, with the big entertainment congloms and cablers giving back much of the gains they achieved in the late 2003 market boomlet.

As in previous quarters, Viacom, Fox and Disney will all be able to show healthy percentage earnings gains off of their cable networks, which should more than compensate for a lackluster showing on the filmed entertainment side.

Viacom, which will be first to announce its earnings, will issue a first-quarter report on Thursday that’s sure to highlight CBS ratings gains and a strong showing from its cable networks group. Analysts are expecting a sales rise for the period of around 10% to just over $6.5 billion.

Disney, which reports the results of its second fiscal quarter on May 12, should see a hefty profit rise over the same period last year, driven by continuing growth at sports net ESPN and cost savings at ailing net ABC that should more than compensate for the Alphabet’s sagging ratings.

Prudential analyst Katherine Styponias said that compared with the same period last year — when the company delivered a $105 million loss — ABC should post positive operating income of $4 million. The depressed theme parks biz is also staging a big comeback, she noted.

Time Warner is still weighed down by regulatory and strategic questions swirling around online unit AOL. The increasing likelihood that the company will make a major cable system acquisition has left investors in a cautious mood, despite another strong quarter from the cable net group. Investors listening in on the company’s April 28 call will be particularly attuned to news of the SEC’s accounting investigation as well as any imminent plans to bid for bankrupt cabler Adelphia.

None of the major congloms are likely to produce strong results for their feature film operations. To be sure, the first three months of a year usually rep a studio’s weakest quarter. But a weak outing at the box office early in the year can spell trouble six months down the road when those same titles hit the all-important video window.

Typically, total DVD/video sales and rental income can be around 150% or more of a film’s total theatrical sales.

Morgan Stanley analyst Rich Bilotti said Disney earned $40 million-$50 million in profit from the hockey drama “Miracle.” But that will be offset, he noted, by as much as $60 million in estimated losses on “Hidalgo.”

The Street is also waiting to see whether the Mouse will take a hefty writeoff on “The Alamo.” Morgan Stanley predicted that Disney’s first quarter slate will result in an ultimate deficit of $20 million-$25 million over its lifetime.

Viacom, whose Paramount Studios released only four titles in its first quarter, will likely post a loss of $50 million-$60 million on its release slate, said Bilotti. Most of that loss comes from “Twisted,” which grossed $25 million in domestic theaters but was budgeted at $50 million.

Fox, which wrapped up its fiscal third quarter last month, had an equally slow start to the year, though the studio spent a lot less than Disney, with many of its films in the modest $10 million-$20 million range. “Welcome to Mooseport” generated barely $14 million at the U.S. box office, but it cost an estimated $30 million, Bilotti noted. The big test for Fox in the current quarter will be $125 million-plus pic “The Day After Tomorrow,” which bows Memorial Day weekend.

Warner Bros./New Line is expected to posthealthy gains on “The Butterfly Effect,” “Starsky and Hutch” and “Scooby-Doo 2.” Those results will be offset by losses on “Torque,” “The Big Bounce,” “Spartan” and “Chasing Liberty.”

Fortunately, New Line’s “The Lord of the Rings: The Return of the King” continues to generate B.O. coin long after its Dec. 17 debut. As much as $450 million of the film’s estimated $1.1 billion global cume was generated in the first quarter of 2004. (New Line sold the majority of overseas rights but participates in sales overages.)

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