NewsCorp, CBS Most Likely Victims of Ad Slump, Says UBS

29 May 2008

NEW YORK: The ad industry is set to bear its share of the pain as recession grips the USA, notably in the automotive and finance sectors predicts Swiss bank UBS. It identifies News Corporation and CBS as "more at risk than their peers", citing the two media giants' higher exposure to auto and financial ads.

But CBS sibling Viacom is less at risk, opines UBS analyst Michael Morris: "Due to its lower advertising exposure to autos and financials and higher mix of more economically resilient advertising partners [fast-food and consumer staples], we view 'buy'-rated Viacom as best positioned relative to peers." 

He fingers CBS, seventy percent of whose revenues accrue from advertising, as the most exposed among all media conglomerates to ad risks in a weak economy. Other 'high-vulnerability' giants are NewsCorp, Disney and Time Warner.

According to Morris, "autos represent a particularly high-risk business at 12% of total adspend, with 0.6% consensus estimated revenue growth in 2008".

He notes that NewsCorp has four car advertisers among its top ten marketing partners, CBS has three, and Disney and TW two each, while Viacom has none.

The latter's marketing partners include film and entertainment companies – a category Morris argues will not suffer even in a recession.

"Entertainment advertising is resilient, as companies have already invested a lot of time and capital into the production of their theatrical releases and must market them to drive ticket sales and reach profitability on the films," he said.

Data sourced from AdWeek (USA); additional content by WARC staff