By Nathalie Tadena 
 

In a tumultuous week for global markets, media stocks weren't spared from investors' jitters, adding to an already dismal August for the industry.

Stocks around the world plunged and the Dow entered correction territory this week on signs of a slowdown in China's economy, lackluster global growth and falling commodity prices.

Media stocks were no exception to the market rout. Shares across the industry have been dropping for more than just this week, ever since earnings reports earlier this month revealed that the threat to traditional TV businesses of consumers cutting the cord or downgrading to skinnier pay-TV bundles may be even more dire than previously thought. The sector lost more than $50 billion in market value during a massive two-day stock sell-off earlier this month.

Media shares took an added punch on Thursday after Bernstein analysts released a scathing report questioning the resilience of the TV industry in an age where TV advertising is "undeniably in secular decline" and even affiliate fee revenue is at risk.

"On a recent sleepless night, we had this epiphany: the market is now valuing U.S. ad-supported TV businesses as structurally impaired assets," Bernstein analyst Todd Juenger wrote. Mr. Juenger, calling for a new framework to value the media sector, downgraded his ratings on Walt Disney Co., which owns ESPN and ABC, and Time Warner, parent of CNN and TBS, to "market-perform."

This week, shares of Disney and Time Warner fell 7.8% and 7.1%, respectively. Viacom, the owner of MTV, suffered an 8.7% stock decline, while 21st Century Fox's stock fell 7.7% for the week. Netflix shares slumped 16%.

In comparison, the S&P 500 fell 5.8% this week while the S&P 500 Media Index is off 5.9%.

Advertising stocks, such as Omnicom and Interpublic, have also underperformed the broader market this week. Since last Friday's close, Omnicom shares are down 6.3%, while Interpublic's shares are off 7.3%.

Still, ad holding companies have been relatively more stable amid the media meltdown this month because they offer diversified services and are adept at managing costs, Macquarie analyst Tim Nollen wrote in a research note Friday. Omnicom and Interpublic have each won considerable new business so far this year and further account wins "could provide support if markets fall further," he wrote.

Mr. Nollen's report noted TV stocks have fallen an average of 19% in August while Omnicom and Interpublic have together fallen 4%.

"We view the ad agency groups increasingly as business services and organizations that handle broadening client mandates across marketing, data and technology," Mr. Nollen said. "They are media-neutral--if TV ads shift to digital, agencies are handling that creative and media work and even gaining from more fee volume."

 

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(END) Dow Jones Newswires

August 21, 2015 17:27 ET (21:27 GMT)

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