War Is Bad News for Media Stocks

The most recent evidence for this trend, says Jacoby, was TV broadcaster and newspaper publisher Belo's (BLC Quote) announcement Tuesday of first-quarter results that will fall short of expectations.

Though Belo didn't make references to Iraq in its press release, executives at Clear Channel Communications (CCU Quote), the nation's largest operator of radio stations, made an explicit connection last week between waiting for war and first-quarter results.

"Q1 started very, very strong," Clear Channel president Mark Mays told analysts on a conference call, according to a CCBN transcript. "As the war rhetoric started to increase over the last two or three weeks, we have simultaneously seen advertisers start to sit on their hands and be very cautious about when the war will start, and, therefore, they have slowed down placing business for late February and early March."

To Be Sure

On the bright side, various signs indicate that advertisers are still spending money, says Jacoby. For example, advertising on the NCAA men's basketball championship, better known as March Madness, is boasting sellout rates and pricing better than last year, he says. Annual business in place at local TV stations, says Jacoby, is double where it was last year, indicating pent-up demand for spending that will translate into ads later in the year.

Cancellation rates for previously reserved advertising also appear to be at lower-than-normal levels.

And Clear Channel's Mays says that despite advertisers' first-quarter hesitation, "We're seeing advertisers continually place business for the second quarter, and, in fact, we're ... feeling very robust about Q2." That's a sign, perhaps, that advertisers are hopeful a conflict will be quick and nontraumatic for American audiences.

"Advertisers are not walking away," says Jacoby. They're just being selective and more cautious."