Murdoch, Redstone & The Credit Crunch

The credit crunch is hitting the whole media sector — and hard. Two media moguls in particular, Sumner Redstone and Rupert Murdoch, have seen their firms' stock prices hammered. But they're finding themselves in diverse spots and they're spinning their situations quite differently.

Sumner Redstone, Chairman of Viacom and CBS, has been hit harder than any of the other media titans. CBS and Viacom are trading near all-time lows. Year to date, CBS is off some 67 percent, and Viacom is off about 57 percent. The stock drops are forcing Redstone to sell $233 million of CBS and Viacom stock to cover his National Amusements' theater chain's debt covenants.

This weekend, it came out that Redstone is creating a committee to negotiate with lenders to secure National Amusement's debt, to avoid having to sell more stock if share prices fall further. And it's not out of the question that the stocks would continue to fall. Just today Pali Research's Richard Greenfield initiated coverage on CBS with a "Sell" rating.

Meanwhile News Corp.'s stock has also plummeted: it's been trading around a 10 year low, and is off more than 50 percent year-to-date. Yet Murdoch insists he's optimistic, saying at News Corp.'s annual meeting Friday that the company is "as well positioned as we can be." He also said the company has "no debt" — pointing to a 22-year average debt maturity — and a $5 billion "war chest."

Despite the downturn, News Corp. is looking to expand in Eastern Europe, India and Asia. And with that hefty war chest, Murdoch is open to acquisitions, saying that he'd even be open to buy up assets from Viacom or CBS, at the right price.

But no media company — especially not News Corp — can deny industry-wide challenges like transitioning to digital distribution and an advertising downturn that's hitting older media formats, like newspapers, particularly hard.

This confluence of sector and cyclical has hammered all the media stocks. Take a look at Time Warner , around a 10 year low, down over 37 percent year to date. By some people's estimates the company's pieces — its' publishing division, movie studio, cable, etc. — are worth more than its $37.5 billion market cap.

There's no question the credit crisis will change the landscape of big media — but there is a question whether and how any of these companies can emerge from the downturn, stronger.

Questions? Comments?