Economy should slow urge to merge

Media consolidations unlikely, analysts report

Rock-bottom stock prices won’t likely yield a near-term urge to merge among entertainment companies, a trio of Wall Street analysts suggested Thursday — though there could be opportunities for deals once the market begins to recover.

The exchange took place during a Hollywood Radio and Television Society forum dubbed “Wall Street’s View of the Future of Television,” held in Century City. The session was not surprisingly dominated by gloom surrounding the deflated stock market, which has battered the entertainment sector in recent days.

Jeff Logsdon, managing director at BMO Capital Markets’ Equity Research Group, said he didn’t really anticipate further media consolidation while stocks are trading this low. “Conglomeration has really been the pathway to lower valuations” for the major studios, he added.

Natixis Bleichroeder managing director Alan Gould agreed, albeit with a disclaimer — that there would be a window for savvy acquisitions as the market starts to rebound. The question is, he said, “Who’s going to be opportunistic at the right time?”

Despite entertainment’s deflated stocks, the analysts maintained that the industry is still “somewhat recession-resistant,” Gould said, and “reasonably healthy,” as J.P. Morgan Securities managing director Christa Thomas put it — with companies that rely heavily upon advertising generally seen as being in worse shape than others, with local TV suffering the most acutely.

Although the business’ fundamentals might be sound, Logsdon conceded that studios “don’t live in a Pollyanna world where (they can say) let’s run this for the long term,” without feeling pressure to meet their quarterly projections to satisfy Wall Street. In that regard, News Corp. — thanks to chairman Rupert Murdoch — was singled out as the one studio that tended to pursue a more strategic long-term approach.

Logsdon and Gould differed on whether pay-to-view Internet downloads offered a significant boon to the industry — the key being whether those revenues are incremental or cannibalize existing sources. Moderator Dick Lippin did elicit some rosier observations toward the end about the unabated appetite for entertainment, but Logsdon was especially grim about the current conditions depressing stocks — including depressed housing prices and the lack of liquidity.

“It doesn’t feel like we’ve solved any part of it,” he said.

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