Moody’s sees ad revenue declines moderating


Moody’s Investors Service isn’t yet calling an end to the tough times for media and entertainment companies. However, its latest analysis is that ad revenue declines should moderate for the rest of 2009, although there’s no prospect for year-to-year growth until mid 2010.

“Media and entertainment (M&E) companies have pulled back from the abyss, but they’re not rushing to buy mountain climbing gear just year,” said Moody’s VP/Senior Analyst John Puchalla in his M&E section of a wide-ranging “Special Comment” by Moody’s analysts on the outlook for various sectors in the current economy.

Puchalla wrote that revenue declines “that were accelerating at an alarming rate into the first quarter stopped deepening in the second quarter.” That allowed the bond issuers that Moody’s tracks to hold off on cost cuts “that were threatening to cut more deeply into the bone.” What he’s expecting now is that advertising declines will moderate over the balance of 2009, but the analyst doesn’t anticipate a return to year-to-year-growth until mid 2010. “Spending on state and local political races, the 2010 World Cup, and a potential peak in the US unemployment rate by mid-2010 offer hope that advertising trends will improve as the next year progresses,” he said.

There is good news on the financing front. Puchalla said the bond market is more open to M&E companies. However, bank credit remains tight.

Puchalla’s commentary is included in the 22-page Special Comment entitled “Moody’s Global Corporate Finance: Are Corporates on the Road to Recovery.”