Media companies are on edge after watching their value plunge in the global stock selloff Thursday.
Despite recent earnings showing robust ad sales, they are perceived as vulnerable because of tremulous economic conditions and uncertain ad spending.
Case in point: CBS, which is more dependent on advertising than other more diversified media companies, took the hardest hit. Its stock dropped 9.3%.
Compare that with a new media darling like Apple, which during the debt negotiations was touted as having more cash than the U.S. government. It declined 15.2 points, or just 3.87 percent.
"A healthy economy is critical to supporting the advertising industry, which supports television production and distribution," Bruce Rosenblum, president of Warner Bros. Television Group, told TheWrap earlier this week just after the debt deal passed.
He added: "We had a healthy upfront. But the next real test will be cancellation options. If the economy deteriorates further, that's a meaningful risk to our business."
By some indications, the television industry ought to feel sanguine. This year’s upfronts offered spectacular ad sales. The five major networks netted $9.2 billion in commercial time during the big selling season.
And media companies have been making money. Just Wednesday, Time Warner and Comcast announced that they had exceeded analyst expectations in earnings. And before the market opened on Thursday, Discovery Communications reported an 11 percent jump in revenues and a $1 billion stock buyback.
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But despite the huge upfront, and the strong earnings, advertisers have cancellation options, as Rosenblum noted.
In the worst single-day selloff since December 2008, the Dow closed down 512.53 -- a 4.31 percent drop. The Nasdaq was down 136.68, or 5.08 percent. The Standard & Poors 500 dropped 60.24, or 4.79 percent.
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Analysts contacted by TheWrap after market close on Thursday said that companies that depend on advertising revenues are especially vulnerable right now, including CBS and Viacom, which plunged 6.1 perent.
In Hollywood, reactions ranged from gallows humor to concern and determined optimism. The sharpness of the decline was hard to shrug off completely.
"We have to pay attention to this stuff because our business is independently financing movies," Dylan Russell, vice president of production, Stone Village Pictures, told TheWrap. "We’re dealing not only with the studios but also the private investors, the foreign sales companies so a ripple anywhere always reaches its way to our shore. We just have to keep tabs on what’s going on."
Film finance expert Jeff Steele told TheWrap that Thursday’s selloff could hurt deals that are in the middle of being closed.
“If someone is on the verge of closing a deal with an investor that is tied to institutional markets, Wall Street and that sort of thing, why that could obviously rock their deals,” he said.
