Big Media Positioned to Survive Financial Crisis

Report: Time Warner, Disney among those best poised to weather down economy.

By Jason Fell
10/01/2008

Diversified media companies will have a better chance of staying afloat during this credit crisis, according to a report from global ratings agency Fitch Ratings.

According to the report, companies like Time Warner and the Walt Disney Company—which owns Disney Publishing Worldwide—benefit from “strong and stable” operating liquidity, diverse revenue streams and “meaningful amounts of capacity” in the form of cash on hand. Other media conglomerates mentioned in the report include News Corp. and Viacom.

This morning, Time Warner stocks were trading at $12.80, down 2.36 percent from the previous close. Walt Disney Company stocks were trading at $30.05, down 2.05 percent.

The report analyzed media and entertainment sector liquidity in regard to the “systemic reduction in lending capacity” due to recent collapse of Lehman Bros. and the expected mergers of Bank of America and Merrill Lynch, and Citigroup and Wachovia.

“Although facing both cyclical and secular threats, the media and entertainment industry is characterized by relatively predictable revenue streams and high margins,” the report says. “High free cash flow conversion is supported by limited working-capital swings, low capital expenditure and (sometimes) low cash taxes. Fitch believes these factors make some media companies relatively attractive borrowers for banks and bondholders, even under more selective market conditions.”