Over a month ago, film and TV writers in Hollywood and New York City went on strike. Now, Wall Street is starting to take them seriously.

With fresh memories of the auto industry's relatively tame labor negotiations in Detroit, analysts initially wrote off the writer's strike as a feud between show business types that would have little financial impact on the nation's giant media conglomerates.

But negotiations between the Writers Guild of America and the Alliance of Motion Picture and Television Producers broke down last week, and production of nearly all scripted network TV shows has ground to a halt. Now it appears that the logjam will persist well into 2008, threatening to push an already gloomy revenue forecast for the industry off a cliff.

"This has already gone on longer than many of us suspected, and it will catch up with these companies at some point," says Frederick Moran, analyst with the Stanford Group Company.

"To the degree that there is a lack of new quality programming, viewers will get impatient with the quality of TV shows," Moran says. "While it's difficult to pinpoint the financial impact, we could certainly assume that TV ratings will go down and revenue along with them, so this is an overhang of concern that probably is not fully reflected in stocks of media and entertainment companies."

Most media giants have seen their stocks decline since the strike began. While the drops have come amid selling in the broader stock market indices, which have been buffeted by continued credit concerns in the financial sector, they have been steeper than the rest of the market's.

Since Nov. 5, the S&P 500 has shed roughly 3.7%. Meanwhile, shares of CBS ( CBS) have dropped 5.7%; Disney ( DIS) has lost 3.9%; News Corp. ( NWS) has shed 6.5%; and Time Warner ( TWX) has fallen 8.1%.

Viacom ( VIA) has avoided the selloff, rising 4.3% for the period, but General Electric ( GE), owner of NBC Universal, has dropped 9.3% since the strike began.

NBC, which was mired in a ratings slump even before the strike hit, has taken the extraordinary step of giving advertisers cash back for primetime ratings shortfalls rather than compensating them with "make goods," or additional TV spots.

Jordan Breslow, director of broadcast research with MediaCom, says he expects other networks to take similar steps, and if the strike lingers on, he says the networks may cancel the "upfronts," the annual confab between the media networks and Madison Avenue that usually amounts to entertainment, nightly parties and an orgy of ad spending.

"The networks' press tour in January has already been canceled, so there may be no pilot development," says Breslow. "There may be no upfront, because they have nothing to show. They may just rely on phone conversations and going one-on-one to each of the agencies and saying 'this is what we have.' I hope it doesn't come to that but it's very likely."

The upfront season usually costs the networks around $3 million to $5 million, but they bring in billions in ad buys. Networks are spinning the strike as an opportunity to break with the industry's traditions and do things differently. Conversely, the Los Angeles Times reported that "dozens of striking film and TV writers are negotiating with venture capitalists to set up companies that would bypass the Hollywood studio system and reach consumers with video entertainment on the Web."

If Wall Street was caught flat-footed by the writers' strike, it may reflect a lack of a sense of history. The last such strike occurred in 1988 and it went on for 22 weeks. The current strike has only been in place for seven weeks.

NBC's late-night comedy hosts Jay Leno and Conan O'Brien have agreed to return to the air on Jan. 2 with or without their writers, but that offers little hope of an overall resolution since both hosts were careful to express support for the guild.

Negotiations between the writers and the production companies have revolved largely around issues related to the distribution of movies and television shows over the Internet. Recently, guild demands for jurisdiction over reality TV and animated-film writers have also been a sticking point.

All the networks are expected to lean heavily on reality TV in January and February to fill their prime-time schedules. News Corp.'s Fox Broadcasting is especially well positioned with its smash hit talent show "American Idol" on tap. For its part, NBC will have reality shows on almost every night of the week, with shows like "American Gladiator" and "Celebrity Apprentice."

Disney's ABC held two new scripted shows, "Cashmere Mafia" and "Eli Stone" for midseason, but it's also launching reality experiments like "Dance War: Bruno vs. Carrie Ann" -- a "Dancing with the Stars" spinoff -- and "Oprah's Big Give," a show documenting Oprah Winfrey's efforts to help people.

Analysts agree that CBS is the most vulnerable media stock if the strike persists, since it's the company most heavily levered toward network ad revenue. Also, its TV broadcast division has little in the way of scripted TV held over for midseason.

That said, NBC is the most vulnerable network in terms of ratings performance, and GE is already facing intense pressure from investors to spin off the media division. A protracted strike could only ratchet up that pressure even further.

All this comes against the backdrop of an advertising malaise weighing on the industry that has been exacerbated by the rise of Internet giants like Google ( GOOG) and Yahoo! ( YHOO). Most economists agree that the U.S. credit and housing mess has raised the odds of a recession in 2008, threatening to make things even worse.

"The writers' strike doesn't totally devastate the outlook for these companies financially, but it makes it tougher to show growth in an already depressed environment for advertising demand," says Moran.