News Corp. Chief Executive Officer Rupert Murdoch and Sony Corp. CEO Howard Stringer say a pickup in the economy may not come until 2009. Murdoch, attending Allen & Co.’s media conference in Sun Valley, Idaho, said today that he is “very bearish” as food and energy prices rise for consumers and anticipates “another 12 months of hard slogging.” Stringer said he doesn’t see a change until next year.
“Everybody is struggling,” Stringer said in an interview late yesterday. “What’s happening in the market right now is touching everyone.”
The Standard & Poor’s 500 Media Index has dropped 15 percent this year as a worsening economic outlook and rising commodity costs for companies lead to cutbacks. The executives’ comments are similar to those made by Dow Chemical Co. Chief Executive Officer Andrew Liveris when he announced the $18.8 billion purchase of Rohm & Haas Co. today. Liveris said in a television interview that Dow’s presence in international markets is helping counter the effects of record high oil prices on its U.S. profit margins. He said he expects the economy to weaken further.
Really Squeezed
The U.S. economic expansion may slow to the weakest pace in six years in the fourth quarter, after the impact of federal tax rebates fades, according to a Bloomberg survey. Former Bristol-Myers Squibb Co. Chairman James Robinson III, also in Sun Valley this week, said in an interview that rising oil, food and commodity prices are making it difficult for consumers. Murdoch echoed those comments.
“Every country in the world has serious food inflation and then of course you’ve got the same thing with energy,” Murdoch said in a television interview. “It’s really squeezed.”
Murdoch said the entertainment industry is “doing just fine” so far, and media stocks have been overly penalized. News Corp., based in New York, has dropped 29 percent this year on investor concern about a slowdown in advertising and at the company’s MySpace social-networking Web site. Time Warner Inc., the biggest U.S. media company, has lost 16 percent, and No. 2 Walt Disney Co. is down 8.3 percent.
News Corp. Class A shares rose 18 cents to $14.56 at 4 p.m. in New York Stock Exchange composite trading.
Not Enough
Media companies aren’t doing enough to tell investors that their fundamental businesses will remain strong, said Vivendi SA CEO Jean Bernard Levy. Vivendi has declined 21 percent this year in Paris trading. The stock fell 12 cents to 24.94 euros today.
“Investors understand good operating performance,” Levy said. “When you operate well, you will outperform any benchmark, and then they will see where the truth lies.”
Sony’s American depositary receipts have declined 24 percent this year, and advanced 75 cents, or 1.9 percent, to $41.17 in trading today. U.S. ad spending will increase 2 percent this year, less than the 3.7 percent projected earlier, as carmakers slash spending, Magna Global forecasting director Robert Coen said this week. The reduction reflects slower economic growth. Sony will continue its focus on making “great consumer products,” Stringer said. The Tokyo-based company’s film business will hold up in an economic slump, he said.
“Our films, all films really, can do quite well,” Stringer said. “There’s what I like to call a Shirley Temple factor. During the Great Depression, people escaped hard times by going to the movies, and I think people will seek that escape again.”
Universal Pictures President Ron Meyer said in a separate interview yesterday that his company’s sources for film funding haven’t really changed, despite the slumping economy.
“There’s always money out there,” Meyer said. “People show up. We don’t go out searching for it.”
Article courtesy of Bloomberg.
