Media Stocks Claw Back, Following Rest of Market

After a rocky start , the stock market began the long road back to regaining the massive losses of the past few weeks. Cable shares began to show signs of recovery but still have considerably more ground to reclaim.

The Dow Jones Industrial Average plunged 1,000 points in the first six minutes of trading on Aug. 24, the single largest intraday decline in the index’s history, before ending the day down 588 points. Cable stocks, some down as much as 10% earlier in the day, tempered those losses as the day progressed, with distribution shares down between 2% and 4% and programmers dipping between 3% and 7%.

The next day was almost as volatile: After a 440-point gain early in the day, the market ended down 205 points as sentiment again did an about-face. Cable seemed to weather the storm well — some stocks like Time Warner Cable, Cable One, Netflix and The Walt Disney Co. showed small gains, while others kept their losses to a minimum.

By last Wednesday (Aug. 26), value investors snapped up stocks by the barrelful as the Dow surged more than 619 points and cable stocks again improved. Charter had the biggest gain at 3.7% for the day, while Disney added another 3.5%, and Time Warner Inc., and Fox each rose 2.8%. On Aug. 27, the Dow had another strong day, up 369 points at the close. Cable stocks were up between 2% and 4%.

The positive momentum shifted slightly on Friday (Aug. 28) — the Dow was down about 40 points in early-morning trading — but cable stocks managed to hold their own. Stocks were mixed by midday in the trading session, with several posting gains of 1% to 3% while others saw declines in the 1% range.

For cable stocks, the losses earlier in the week were more tuned to global economic uncertainty, and the later gains came as a result of the rising tide of the overall market. Cable stocks still haven’t fully recovered from their precipitous drop on Aug. 5-6, when the sector lost billions in market capitalization.

Overall, the distribution sector was still down about 2.6% despite the gains of the past week.

Content stocks — pummeled in the early August decline — were down 17% between Aug. 45 and midday last Friday.

In a note to clients, Sanford Bernstein media analyst Todd Juenger warned that the U.S. television industry remains in the midst of a prolonged structural decline spurred by a shift of viewers to platforms with little or no advertising. Juenger favors companies with less ad exposure, more sports and strong international positions.

“But we fear the entire sector will struggle to work until the content owners take concerted action to reclaim on-demand viewing from the SVOD services and use it to protect affiliate fees,” Juenger said.