Corporate bonds don’t behave quite the same as stocks and don’t get nearly as much day-to-day attention from most investors. We do, though, find it interesting to read what veteran broadcast analyst Bishop Cheen and his associates at Wachovia Capital Markets have to say about the media industries that they track for bond investors. While Cheen sees HDTV as the “killer app” for television, he sees only a “potential modest lift” from HD Radio as new digital radio channels are slowly rolled out. “We do not believe the upside of HD Radio will be of the same magnitude of HDTV, but it may help stabilize a currently weakened medium,” the Wachovia analysts said in their 2008 Outlook.
Meanwhile, there are real challenges for broadcasters. “The auto industry, which contributes roughly 16% of radio and 25% of TV revenues, has been struggling to find stability along with a fragile retail economy. Rising gas prices will likely curtail time spent listening. Audience measurement via a shift to a currently glitchy people meter is also problematic, especially for radio,” wrote Cheen and Davis Hebert, who handle high yield bond research for radio, TV and outdoor at Wachovia.
The bottom line for investors is that they are underweighting radio bonds and overweighting TV “in line with our earnings expectations, in addition to where we think capital may flow once the credit crunch abates.”