Economic Woes May Mangle Media Stocks

With economic storm clouds gathering, offline media companies stand to be drenched.

A report from Moody's Investors Service on Wednesday says media outfits with exposure to print and broadcast advertising will be the most vulnerable players in the sector in the event of a recession.

Moody's says Internet search-related advertising, a market dominated by the likes of Google (GOOG Quote - Cramer on GOOG - Stock Picks) and Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks), is better off because it's cheaper and more responsive.

"Because of the drain on traditional branding in favor of creating a robust Internet presence and search-engine links, companies highly exposed to only the branding element of advertising have come under pressure," says Moody's in the report. "We anticipate the continuation of this trend will lead to increased spending on Web site creation and search at the expense of more costly brand-building efforts in traditional media."

With the U.S. housing slump shaking the world's financial markets, Moody's believes that the risk of a recession has reached its highest levels since 2003.

In the media sector, companies that could lose their investment-grade credit ratings in the event of a downturn include newspaper publishers Gannett (GCI Quote - Cramer on GCI - Stock Picks), New York Times (NYT Quote - Cramer on NYT - Stock Picks) and Belo (BELO Quote - Cramer on BELO - Stock Picks), as well as radio broadcaster Clear Channel Communications (CCU Quote - Cramer on CCU - Stock Picks), the ratings firm said.

Those with the least potential for vulnerability include Viacom (VIAB Quote - Cramer on VIAB - Stock Picks), Comcast (CMCSA Quote - Cramer on CMCSA - Stock Picks), Time Warner Cable (TWC Quote - Cramer on TWC - Stock Picks) and Cox Communications, the report said.

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