Media Kingpins Face the Music

As media captains return from their annual Sun Valley retreat, a haze of ambiguity blankets the industry.

Between dawdling ad sales, changing technology and stalled deregulation, there is plenty to fret about. Investors once wooed by lofty consolidation promises are now being told just short years later that the synergies weren't quite what they seemed. Adding to the confusion, these companies feature countless moving parts and, in some cases, act essentially as the personal fiefs of hard-hitting but nonetheless fallible media titans.

And to put it mildly, the stocks of big diversified media companies have not fared well recently. Only Disney (DIS), driven by a turnaround at ABC and its theme parks, has posted more than a token gain over two years.

So are the big media stocks dead? Hardly. But the challenges that lie ahead are substantial, and handicapping a winner among the big names -- Disney, News Corp. (NWS), Time Warner (TWX), Viacom (VIA.B) and Liberty Media (L) -- is anything but clear-cut.

"A number of these companies face big transactional questions," says Larry Haverty of Gabelli Asset Management. "Time Warner is being held hostage by the Adelphia transaction, Viacom by the split, Disney by concerns over new management and News Corp. by the situation with [Liberty Chairman] John Malone. These create inhibited investors." Gabelli's multimedia trust has positions in the companies mentioned.

Doing Deals

That's not to say the companies aren't trying to move forward. Time Warner agreed this spring to a joint $17 billion deal with Comcast (CMCSA) to buy bankrupt Adelphia Communications, in an acquisition designed to expand its cable footprint. Viacom investors will be keeping their fingers crossed that two companies can draw investor interest where one didn't. New Disney CEO Bob Iger has made progress on many fronts, from Pixar (PIXR) talks to smoothing over board hostilities. And News Corp.'s Rupert Murdoch is said to be preparing a new cable business news channel.