Nonetheless, the outlook on television advertising, according to Doug Creutz, a San Francisco-based analyst at Cowen & Co., is "O.K., not great" and News' Fox network "has some ratings issues that they do need to fix." Indeed, viewership at Fox among the coveted 18 to 49 age group has been 23% lower this season through March 17 compared to the same period a year ago. "American Idol" may finally have run its course. But that less-than-stellar picture hasn't phased investors, or Wall Street analysts. Creutz is one of 20 sell-side marketers who rate News Corp a 'buy,' or its equivalents, versus three analysts with a 'hold.' Larry Haverty, a portfolio manager at GAMCO Investors and an owner of News Corp shares, says investors have been monitoring the company's cash flow projections, and like what they see. Sure, advertising isn't growing at a double-digit pace but distributors of Fox's broadcast and cable-TV networks are paying more to carry those channels. The profit picture is enticing: News Corp's earnings per share on an adjusted basis is expected to rise 19% this year and 18% in 2014, according to the average estimate of 24 analysts in a Bloomberg survey.
"Most of the cash flow is coming from the cable networks, and cable networks are the best media business around," Haverty said in a phone interview on March 26. "Advertising is volatile but affiliate fees are steady and predictable, and those fees are growing faster than the ad market.'"
"The Fed, the European Central Bank and now the Japanese are trying to pump up their economies giving the illusion that things are really improving," Vogel said in a March 25 interview. "The Fed's policies are creating tremendous inflation. At best this points to sluggish growth, and at worst, we're headed for a sharp change of direction in the stock market." If the market does turn downward, Vogel forecasts advertising will fall sharply, and even higher affiliate fees won't be enough to compensate for the decline. "When it turns, it will be violent and it will be quick," Vogel warns, "because a lot of this market has been supported by central bank actions that are becoming less and less effective." Any market that has gained 131% from its low in March 2009 will have its collection of naysayers. But while Haverty acknowledges that News Corp and media stocks generally have benefitted from investors borrowing at low interest rates and investing in the market, he doesn't see doomsday.