S&P Equity Research: The China Conundrum For U.S. Media Companies

Jan 29, 2010, 09:30 ET from Standard & Poor's

NEW YORK, Jan. 29 /PRNewswire/ -- China continues to pose a myriad of atypical challenges for U.S. media and entertainment conglomerates, according to Standard & Poor's Equity Research. Over the years, companies such as News Corp. [NWS 15 ***] [NWSA 13 ***], Viacom [VIA.B 29 ***], Time Warner [TWX 30 ***] and Disney [DIS 29 ****] have tried to capitalize on what remains an elusive opportunity to plant a meaningful toehold in the world's most populous nation, and one of its fastest-growing emerging markets, observes Tuna Amobi, Media & Entertainment Analyst at S&P Equity Research.    

"Perhaps more than any other development in recent memory, Google's [GOOG 542 ****] potential pullback of its search operations in China shines further light on the potential quandaries confronting foreign media companies that have largely come up short in the Chinese market," says Mr. Amobi.  

"Well before the glitzy spotlight of the 2008 Beijing Olympics, we believe China has held a special allure for U.S. media companies, increasingly looking to tap higher international growth opportunities for filmed entertainment, cable and broadcast channels and publishing businesses, continues Mr. Amobi. "In theory, China's sustained economic growth, combined with the attractive demographics of its over 1.3 billion populace, offers some key ingredients for the world's leading media brands to thrive in what is now the world's third-largest economy."

Amobi says the inability of U.S. media companies to effectively establish a lasting presence in the Chinese market has certainly not been for lack of credible or sustained efforts. He notes that Rupert Murdoch and Sumner Redstone, Chairman of Viacom and CBS [CBS 13 **], are among several executives of leading U.S. media conglomerates to have embarked on a mostly futile decade-long odyssey in China – involving emissaries to government officials and business leaders. Even so, he observes that these companies largely have little to show for their fervent lobbying efforts.

"The list of frustrations most frequently cited in our conversations, meetings and calls with U.S. media companies that have gotten some cold shoulders in China rings a familiar bell," says Mr. Amobi. "Among some of the most pervasive challenges are unbridled censorship of content, nationalism, protectionism, stringent media ownership caps and regulations for foreign-controlled entities, lack of legal and political transparency, free market restrictions and other artificial barriers, cultural differences, bureaucracy and lax protection of intellectual property rights."

Amobi concludes: "Ironically, in exhorting the audience of the Beijing Media Summit to adapt to the challenges of a new era, Rupert Murdoch cited Confucius's notion that those who seek constant happiness must often change. And, interestingly, at the same Summit venue, China's President Hu Jintao made what we saw as some thought-provoking comments on the need to boost the healthy and orderly development of the global media industry. While those might initially seem like media-friendly mellifluous remarks, whether they ultimately amount to an actionable clarion call or a carrot-and-stick campaign remains to be seen."

Standard & Poor's equity research, mutual fund, exchange-traded fund and bond research can be found on MarketScope® Advisor, Click Here (http://advisor.marketscope.com). More information on Standard & Poor's MarketScope Advisor is available by calling 1-877-219-1247. MarketScope Advisor is part of the Standard & Poor's Equity Research Services family of products. MarketScope Advisor provides financial advisors with actionable investment intelligence on multiple asset classes including stocks, ETFs, mutual funds, bonds, variable annuities, and workflow tools that enable advisors to stay connected to the market and their investments.

Standard & Poor's equity and fund research draws from STARS coverage and detailed financial information, such as valuation models, sector and peer group analysis, and proprietary Standard & Poor's metrics such as Fair Value and Quality Rankings, on global equities.

About Standard & Poor's Equity Research Services

As the world's largest producer of independent equity research, Standard & Poor's licenses its research to global institutions for their investors and advisors. Standard & Poor's team of experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of multi-asset class securities across industries worldwide. Follow Standard & Poor's equity analysts' U.S. market commentary each day at http://www.equityresearch.standardandpoors.com.

The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade for its own account. The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at www.standardandpoors.com or by clicking here.

About Standard & Poor's

Standard & Poor's Financial Services, LLC, a subsidiary of The McGraw-Hill Companies (NYSE: MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for nearly 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.

All information provided by Standard & Poor's is impersonal and not tailored to the needs of any person, entity or group of persons.  Past performance is no indication of future results. Standard & Poor's and its affiliates provide a wide range of services to, or relating to, many organizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries, and accordingly may receive fees or other economic benefits from those organizations, including organizations whose securities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address.

S&P Global STARS Distribution

In North America

As of December 31, 2009, research analysts at Standard & Poor's Equity Research Services North America recommended 33.7% of issuers with buy recommendations, 54.3% with hold recommendations and 12.0% with sell recommendations.

In Europe

As of December 31, 2009, research analysts at Standard & Poor's Equity Research Services Europe recommended 31.5% of issuers with buy recommendations, 44.0% with hold recommendations and 24.5% with sell recommendations.

In Asia

As of December 31, 2009, research analysts at Standard & Poor's Equity Research Services Asia recommended 35.6% of issuers with buy recommendations, 51.4% with hold recommendations and 13.0% with sell recommendations.


As of December 31, 2009, research analysts at Standard & Poor's Equity Research Services globally recommended 33.5% of issuers with buy recommendations, 52.3% with hold recommendations and 14.2% with sell recommendations.

5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis.

4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis.

3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis.

2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.

1-STARS (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you nor is it considered to be investment advice. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

This material is based upon information that we consider to be reliable, but neither S&P nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. With respect to reports issued to clients in Japan and in the case of inconsistencies between the English and Japanese version of a report, the English version prevails. Neither S&P nor its affiliates guarantee the accuracy of the translation. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

SOURCE Standard & Poor's