Backchannelmedia

Business Wire

Modest declines in 2004-2005 upfront advertising spending indicate caution about the future strength of the broadcast advertising market, according to a Fitch Ratings report. Fitch believes that the upfront market for the broadcast networks may have peaked in 2004, amid declines in viewer ratings and increased competition from other media, such as cable networks, as advertisers look for alternative ways to deliver their messages.

The ownership of cable networks and other businesses by the major media companies provides a partial hedge to broadcast network viewer erosion, but the high margin characteristics of the broadcast networks continues to make them important variables to the performance of media conglomerates. As viewer ratings decline and programming costs continue to increase gradually, Fitch believes that media companies will need to make changes in the cost structures of the networks or risk potential material declines in EBITDA and cash flow from those businesses.

The credit effect of 2004-2005 upfront market on major media companies depends on their general exposure to advertising, as well as to the broadcast and cable markets specifically. The Fitch report provides specifics on several of the major media conglomerates such as Viacom and Walt Disney.

"This season may have been the high-water mark for the upfront market," says Albert E. Turner, a Director in Fitch's advertising and media team. "Gradual increases in programming, coming as network viewership declines, will necessitate changes in the cost structures of the broadcast networks."

The full report, 'Will 2004-2005 Be the High-Water Mark for the Network Upfront Market,' is available on Fitch Ratings' Web site at www.fitchratings.com