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April 23, 2007

Monday Morning Media Madness

Here is your Monday Morning Media Madness:

• On a year over year comparison basis, it was the worst weekend of 2007 for the box office. When all the data is tallied the decline should be a little over 20%. Fortunately, it is usually a small weekend as studios clear their inventory ahead of the launch of the summer on the first weekend in May. Quarter to date, the box office is still running 2.9% behind year ago levels but there is no to worry as May brings the third films in the Spiderman, Shrek, and Pirates of the Caribbean franchises. Speaking of Shrek, the distribution on that film is being handled by the Paramount division of Viacom (VIA). Paramount has now had the #1 film for four consecutive weekends (Disturbia and Blades of Glory) was the #1 film for the second consecutive weekend, continuing much improved performance for the studio. Paramount is only a small part of VIA, less than 10%, but every little but helps.

• Clear Channel (CCU) announced the sale of its TV stations for an attractive pre-tax multiple of 14-15X EBITDA. Additional radio station sales were alos announced at a price of around 11 times EBITDA. This news supports the recently upwardly revised offer of $39 from private equity and would have caused a major storm had it been announced prior the offer going up. I don’t think the TV sales will impact the outcome of the shareholder vote in either direction although it probably gives more talking points to those opposed to the deal. I'd still vote yes and be happy to escape with $39 if I were a CCU shareholder, which I am not....

• Friday's Wall Street Journal had an interesting article on how Hollywood studios are looking to Direct-to-DVD releases of film content as a way to boost revenues. Direct-to-DVD has always been part of the Hollywood's distribution but the focus now is on better quality films with dedicated and unique marketing campaigns. There is not a lot of money here as the largest grossing direct-to-DVD film only brought in $150 million range. Only three films have exceeded $100 million in sales and all were animated fare from Disney. Nevertheless, look for live action films in the year ahead which should have decent production quality despite budgets under $10 million.

• Comcast (CMCSA/CMCSK) reports Friday. I think investors should be long ahead of the call. I expect above consensus results on most metrics and believe there is a strong possibility that the company will raise guidance. I also think that any increased guidance on subscriber growth will no be accompanied by a meaningful increase in capital spending. In-the-money options such as the May $25s or the May $27.50s would be a good play if Comcast produces the good quarter I expect.

Posted by Steve Birenberg at April 23, 2007 09:17 AM in Media