Big media to shrug off economic woes, for now

By Kenneth Li

NEW YORK (Reuters) - U.S. media conglomerates are expected to shrug off the deteriorating economy in the first quarter thanks to strength in their cable networks, but real pain could hit as early as in the second quarter.

Cable TV affiliate fees and advertising have propped up media profits as viewers defected from network TV, analysts said, despite a procession of incrementally dour comments on the economy from top executives of News Corp, Walt Disney Co and Time Warner Inc.

"The large cap media companies will show growth in the first quarter," UBS media analyst Michael Morris said, adding the quarter's advertising was likely purchased on budgets from last year, before the onset of the credit crisis. "The expectation is that growth will slow as the year progresses."

Concerns about the economy aside, the first quarter results from the world's top two advertising agencies, Omnicom Group Inc and WPP Group Plc, suggest U.S. ad spending is holding up relatively well.

Omnicom said last week that U.S. revenue rose 7.6 percent. WPP, while reporting an overall weak quarter dragged by western Europe, also said its U.S. business had held up well.

"First-quarter growth reflected the continued steady overall economic environment, despite the continuing uncertainty stimulated by the credit and liquidity crisis and much heralded slowdown in the United States," WPP said in a statement on Friday.

That is expected to change over the next few months.

"We'll have a pretty big contraction in the second quarter," Standard & Poor's media analyst Tuna Amobi said of advertising spending on television.