Downcast in Davos
The state of online journalism and other media in 2007 and beyond

Is it just "the fear factor", or has the market lost faith in media's business model?

Talking of the mood in Davos, I bet the mood has been pretty grim in many media boardrooms these last few weeks as well.

Of course, since media shares are cyclical and vulnerable to the minute mood swings in the advertisement market, the executives should perhaps expect their companies' stock market value to be down in times of financial turmoil. Still, media shares in Scandinavia and elsewhere took such a massive beating when the global stock market plunged, that one media analyst I talked to called it an "overreaction".

Henrik Schultz, an analyst with Kaupthing in Oslo, said there was no concrete reason why media shares were down as much as they were at the start of this week, other than the market being jittery. However, Nick Ward, an analyst with Panmure Gordon & Co in London, said media shares were challenged in two ways: they were both cyclical AND the media's business model was challenged.

Now, I'm not trying to lead up to one of those journalistic excercises in objectivity here (like in the 2nd rule of journalism: no matter what anybody says, find somebody to say the opposite). I'm just genuinely curious as to what we are seeing: for several of the media companies I follow, the share price started its downward spiral before 2008, though several of those companies saw their share price close up when the markets closed Friday.

One of the sharpest risers in my somewhat random sample this Sunday evening is Mecom (which admittedly is more vulnerable than the other shares I mention here, as it's higher risk being highly geared), who saw its share price more than halved recently (because I've put on my lazy blogging hat today, and my internet connection is too slow, I won't bother trying to find out exactly how low the share price has been, but I seem to remember having seen 21,75 pence or so, and yes I do keep an eye on it, but don't quote me on that number. However, Tuesday 22/1 (10:50) it stood at 23,25p and closed at 30,50p Friday 25/1), Metro, closed marginally up, perhaps on the news of US restructuring, but overall January has been a pretty gloomy month for the freesheet pioneer. Modern Times group (MTG) closed up, as did Schibsted, but I wonder how the market will react to the latter issuing a warning Q4 results will fall short of expectations after the Oslo stock market closed Friday.

Which brings me back to my original question: I know quite a bit about bonds, shares, commodity prices and those sort of things, but I won't pretend that I understand all the inns and out of what's happening to media shares at the moment (actually I didn't fully understand why the gold price fell with the rest of the stock market recently either, I thought gold always was a safe haven in times of trouble), so I'd be grateful for some input on this.

Besides, I found Nick Ward's notion that the market could be punishing the media industry because the industry's business model is screwed, or the investors are loosing faith in it, quite interesting as well - and no, I'm not too interested in what the market should or should not do, tell that to the next well-meaning Norwegian politician you run into, he or she might even make an effort to pass a law to amend the situation – just the dynamics playing out, please....

Update 28/1: Just saw this piece by Peter Wilby in The Guardian (via Greenslade) about how journalists dealt with the recent stockmarket plunge, worth a read. A line to reflect on: As the former Economist editor Bill Emmott observed in the Guardian on Friday, "stock market traders are wild, emotional creatures" - like journalists, he might have added - "and we risk going mad if we try to understand their every move".


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