Safe haven. Two magical — and mysterious — words. Cable and satellite companies didn’t fit the safe haven bill in 2008, but 2009 just may be there year.

According to a Reuters story out today, “cable and satellite service providers now hold the promise of strong free cash flow growth as they retain old customers but spend less on deploying set-top boxes and digital video recorders due to a fall in new subscriber growth.”

Remember, however, that before the economy fell apart, a number of investors considered the pay TV industry “recession proof.” The argument went that even in the toughest of times, Americans would stay home and watch TV, saving money on trips to movies or out to dinner.

But this argument overlooked a number of factors that have really undermined the industry. For example, fewer people are moving into new homes, and those that do aren’t likely  to spend their savings on discretionary channels like HBO.

Before jumping on the bandwagon, however, it may be wise to take a look at some of the earnings coming up over the next couple weeks. Start with Time Warner Cable tomorrow, that should be a good gauge of whether these guys really can provide shelter from the storm.

Keep an eye on:

• The age of Obama dawned with a wake-up call to the U.S. television industry to get serious about Internet-based sources of revenue (Reuters)
• Barry Diller’s Internet media company IAC/InterActiveCorp posted a fourth-quarter profit on Tuesday after benefiting from the sale of a Japanese TV shopping channel last December (Reuters)
• Sirius XM Satellite Radio later this month will have to find a way to handle $174.6 million in debt that is coming due (Wall Street Journal)

(Photo: Reuters)

Sirius XM Radio has got a lot of big issues: a huge debt load; its deflated stock price; the auto industry — its biggest source of news subscribers — is hurting; and consumers are shying away from consumer electronics this holiday season.

The company planned to address some of those issues today at its shareholder meeting, hoping to win the right to issue 3.5 billion shares and launch a reverse stock split. Those moves may not fix all of its woes.

But the company has at least addressed one other festering problem. They are bringing back Monie Love in January.

To be clear, they are bringing back “The Strobe” and “Backspin”, respectively, Disco and Old School Hip-Hip channels that bit the dust when Sirius last month combined its content with XM’s. The consolidation angered listeners and even sparked a mass cancellation effort.

Rapper and Radio Host Monie Love

Most people, save for “hip-hop heads”, have no idea who this respected figure in old school rap is. But for listeners of XM Satellite’s defunct channel “The Rhyme”, her show “Ladies’ First with Monie Love” was a “must-hear”, full of classic jams and special guests. (Think Little Steven’s show for rap crowd).

CEO Mel Karmazin at the Reuters Media Summit suggested that tough times call for tough programming choices. This week Sirius seemed to say “Look! we are flexible!”

We will continue to listen to them (subscribers) as we strive to create the best audio entertainment experience available.
– Scott Greenstein, President and Chief Content Officer, SIRIUS XM Radio.

Now about that $1 billion in debt…

Keep an eye on:

• - Live Nation to lose $19 million on U2 share deal (WSJ)
• - LinkedIn founder Reid Hoffman returns as CEO (WSJ)
• - Disney has been sued over a profit sharing contract (LA Times)

(Photos: Reuters, Monie Love’s Myspace page)

U.S. shoppers are still spending in a big way — they are just not buying cars, plane tickets, clothing, etc. But they are buying video games.

While most media segments try to maintain stability during today’s economic turmoil, the video game industry keeps on growing, with U.S. video game hardware and software sales up 10 percent last month according to NPD, fueled by record sales of Nintendo’s Wii console and DS hand-held system.

Nintendo’s Wii console sold over 2 million units in November, up from over 800,000 in the previous month.

A separate reports suggests that hard times may favor video games, adults will “turn to
staying in with video games rather than going out on the spend.”

(Reuters)

Keep an eye on:

• DreamWorks Animation launches characters like Shrek and the penguins from “Madagascar” into new lines of business, hoping to grow consistently even during a recession that already is slowing DVD sales. (Los Angeles Times)
• Time Warner names CEO Jeff Bewkes as chairman; Richard Parsons to step down on Dec. 31 (PaidContent)
• CBS Interactive reorganization details (PaidContent)
• Howard Stern contemplates re-signing with Sirius XM (Orbitcast)

(Photo: Reuters)

With financial markets in turmoil and the U.S. economy in recession, we asked top entertainment and sports executives at the Reuters Media Summit for some investment advice.

Our question: "If we gave you $50,000, where would you invest?" One rule: They couldn't pick their own company. But then we thought $50,000 was too little for well heeled executives, so we switched it to $50 million. But that seemed excessive. After all, we're talking about personal investments -- so we settled on giving them a cool $1 million.

Here's what they said:

"In a pillow ... You might look at the energy sector, you might see what happens with gold. I've got cousins who work in the banking industry. When I asked them, they told me put it in my pillow. That is your answer."
-- Havas's MPG Chief Operating Officer Steve Lanzano

"I would be in the most conservative mechanisms I could -- treasury bills, whatever, absolutely. The old trite bromide about cash is king? Well, that is true and more true today than ever before."
-- Major League Baseball Commissioner Bud Selig

"I'd put 40 percent of it into exceedingly high-yielding senior debt securities in a diversified array of businesses. I'd put 30 percent of it with a pretty diverse array of fund managers who have a strong track record of navigating choppy times in an array of strategies. And then I'd take the final 30 percent and buy Time Warner stock ... I will tell you why I love Time Warner. OK, so it's trading at 50 percent of book, and these are people who, post AOL, were incredibly aggressive about writing down their book value. So it's trading at 50 percent of essentially tangible books, tangibles you are going to get for a media company. They are not especially exposed to advertising. A lot of their revenues are very sticky. They still own their cable assets. You are getting a free option on the value of whatever happens in the spin-off. They generate, I think, $13 billion in EBITDA right now, if I'm not mistaken. And all their debt obligations are laddered out well into the future so they have no particular financing risk. So if you figure we have three horrible years ahead of us -- and I don't believe we do, but if you do -- they are perfectly fine from a capital point of view for the next few years. And even after all obligations, all repayments, all capex, they still generate loads of free cash flow. Even if you don't think they are particularly well-positioned strategically -- they are currently yielding 2.7 percent, and I see no reason for the dividend to go down."
-- Take Two Interactive Inc Chairman Strauss Zelnick

"If I had a knife, I would probably put it in my mattress. No, seriously, I think if somebody gave you $1 million today, I think my gut tells me that the market would probably be a good place to put it ... But there's a little bit of hesitancy there. Have you reached bottom yet? Who knows. Do you actually have to actually reach bottom before it's a good time to invest? Probably not. But this might be a good time to put money in the market if somebody just hands you $1 million ... I would avoid the financial stocks for now because I'm not sure all the bad news is out. You know, you would think as low as some of those stocks are, that there would be buys, but some of them may not be around at all. So I would stay out of the financial sector. I probably would steer more toward durables and things that people are going to need year in and year out. They can be a bit volatile too, but you know that they are going to be around for years to come. I don't think I would invest in domestic auto stocks today. You know, natural resources and products that are going to continue to be in demand, even some of the medical and drug companies."
-- Regal Entertainment Group CEO Mike Campbell

"Pay off my mortgage would be number one. Yes, absolutely, I would pay my mortgage. And then other than that I would ... because I live in California and my family does it for a living, I think real estate is a great buy right now in California. There's a lot of depressed prices -- business is out there and real estate out there. I like real estate. It will come back."
-- Live Nation CEO Mike Rapino

"It looks to me like there are buys all over the place. I am not an investor or an economist, but just generally speaking, it looks like these companies that we deal with that I know are well managed, companies like Coca-Cola or Disney that are well managed, many of them are just going to be good buys. But I'm not an investor, so what do I know?"
-- NASCAR CEO Brian France

"So 12 years... I took every dime that I had and I put it into tax-free municipal bonds. And then a year ago, but for what I own in Sirius, every dime that I have is either in insured, tax-free municipal bonds or treasuries. So I have been a terrible investor because if you look at the last 12 years, my portfolio has only grown for those 12 years about 3 percent a year. Now if you looked at the stock market during that period of time, I have left an awful lot of money on the table. But if you look, I guess, over the last year, I have done OK compared to where a lot of people were."
-- Sirius XM Radio Inc CEO Mel Karmazin

"I would invest at least 70 percent of it in stocks. I would put a big chunk in Goldman Sachs. I would put some in GE. I would put some in McDonald's. I would put some in new energy, new innovations. I would definitely put a load in Google, and I would put a chunk in Microsoft. So that's split between technology, and I would think about retailers as well. And then I would keep a chunk in cash, 20 percent. And then I'd put 10 percent in governent bonds. But I believe the valuations at the moment, the prices are so disconnected from values of some great companies with tremendous equities that there's tremendous value for the long term."
-- Interpublic's Mediabrands CEO Nick Brien

Would you put your million in the piggy bank?

(Photo: Reuters)

If you’re an old Sirius or former XM subscriber who lost one or more of your favorite channels after the two satellite radio companies merged earlier this year, CEO Mel Karmazin has a message for you: Tough luck, it’s for the greater good.

Karmazin told reporters at the Reuters Media Summit in New York that the two companies had taken the best of breed in each music channel genre from either Sirius or XM as part of a $400 million cost saving drive.

“We’re going to pick the best channels,” said Karmazin. “We’ve gotten hundreds of people who hated it and claimed they were going to cancel. So we’ve analyzed all the cancellations since the rationalization…It’s hard for me to understand what they don’t like.”

“If we took the most aggressive number of people who cancelled and we take that (away) the $120 a year (they pay) it doesn’t get to a $1 million as compared to the significant amount of cost savings as a company that needs to make money,” said Karmazin.

Our colleague Franklin Paul said he was upset with the loss of his favorite classic hip-hop channel, The Rhyme. So Karmazin made his best pitch to an old school B-boy.

“We have other hip hop channels,” coaxed Karmazin.

“You as a subscriber, though you may miss your channel, you need to make sure we make money because you want us to be around so we can invest in programming and we can provide you with all these services,” said Karmazin.

In other words, deal with it.

(Photo: Reuters)

Sirius XM Chief Executive Mel Karmazin is a serial monogamist when it comes to stocks. No matter where he's worked, from Viacom to Sirius, he only buys stocks in those companies, he told the Reuters Media Summit in New York on Wednesday.

Lately, at Sirius, "every dime I've taken in has been spent buying stock," he said. To show his fidelity, he wears special cufflinks in his shirtsleeves. One says "XM." The other says "Sirius."

Otherwise, he steered clear of stocks in the past decade or so, opting for tax-free municipal bonds or treasury bills. "So I have been a terrible investor because if you look at the past 12 years, my portfolio has only grown... 3 percent a year. If you look at stock market at that period of time, I've left an awful lot of money on the table. Over the last year... I've done ok compared to where a lot of people were."

Speaking of Sirius, he notes all the media reports that peg his annual compensation at $32 million are not quite right.

"When I came to the company, I got 33 million options at $4.72 (each). You take the Black-Scholes formula, and it was worth $150 million. Over five years, that's $30 million a year. And I've never sold a share. That four dollars and 72 cents is now worth 18 cents."

That sounds fairly underwater to us.

(Photo: Reuters)

As if Sirius XM Radio didn’t have enough to worry about (like trying to figure out how to pay its debt and cope with the U.S. auto industry’s flameout) now its got to deal with customers grumbling about its radio stations. Some are threatening to quit the service.

That’s right, subscribers are ticked off about what they are hearing on their radios. Not the radios themselves or the quality of the signal or any of that techniclal stuff — we are talking about the actual radio content that subscribers pay $13 or more to hear each month.

Sirius this week unveiled a new channel lineup that combines XM and Sirius’ rock, pop, talk, punk, hip-hop, classical, country, jazz and sports stations. Together, it’s a robust offering of audio content, which may impress new customers. Long time listeners, familiar to particular channels playlists and on-air talent, are speaking up on blogs after the surprise shift.

Tech blogger Dave Zatz said this on his blog, Zatz Not Funny!:

“See ya, XM. I was on the fence and you pushed. Our time together has been mostly positive, but the massive lineup modifications yesterday without any advance notification isn’t the proper way to treat your customers. So I’m walking. “

The chatter is even hotter over at Ryan Saghir’s Orbitcast and the XMFan bulletin board, where thousands have weighed in. Some, for example, are pleased that the XM system that came installed in their new car now gives them access to Sirius channels they had heard before. Most of the comments however, sound like the Hatfields moved in with the McCoys and, as you would expect with rivals, hate each others taste in music.

A taste:

* “Last night, in the car, I did something I had not done in a long time…I listened to a cd. I will not keep my subscriptions if the formats remain “Sirius” ized. I’ve already purchased a car adapter for my ipod.”

* “My wife and daughter are peeved. They liked Kid Stuff on Sirius.” 

* “Mel Karmazin is determined to boost iPod sales.”

I know how they feel: most of the preset stations on my satellite radio were shifted, and two of my favorite channels — a contemporary R&B and an old school hip hop station — are gone. But it’s still mostly commercial free, and I can still get my fill of funk on “70s on 7″.

What is your take on the programming changes on Satellite Radio? Are you happy? Or maybe thinking of playing your iPod in the car from now on?

Keep an eye on:

• Advertising group Havas kept its 2008 operating margin goal on Friday although its sales growth slowed in the third quarter amid a global economic crisis (Reuters)
• Have media shares hit rock bottom? (Reuters)
• Retailers have increased fourth-quarter cinema advertising spending by triple digits on a year-over-year basis – for a variety of reasons (AdAge)

(Photo: Reuters)

Everyone seems to have accepted (like it or not) that advertising spending will be in bad shape in the fourth quarter and well into next year. But just how bad is a matter of debate — every new piece of research marks another downward revision to the advertising outlook.

Case in point is Citi’s Catriona Fallon, who issued a new report saying that U.S. advertising spending would drop by 1.8 percent in 2008 and 3.6 percent in 2009. So what? Well, consider this: that would mark the first back-to-back annual declines since at the 1950s. The 1950s! We’re talking The Cold War, Fats Domino, Gidget, Cadillac Eldorado — you get the picture.

Here’s a bit from Fallon’s research report, where she discussed the thought behind cutting the 2008 outlook from growth of 0.2 percent to a decline of 1.8 percent :

Essentially, we made a dramatic reduction in our Internet advertising growth expectations and also see steeper declines in local ad-focused media categories, including newspapers, radio, and yellow pages. Internet advertising had been one of the few shining lights coming into 2008, but overall economic softness has lowered 2009 expected growth rates in this medium to the single digits. Meanwhile, Q3 results for publicly-traded newspaper, magazine and yellow pages companies, and CIR forecasts for the radio industry show that the ad revenue declines in these businesses have
sharpened over the course of the year.

Anyone seen my Elvis Presley albums?

Keep an eye on:

• More bad new for Sirius XM Radio — as if trading at 27 cents a share isn’t bad enough. The company posted a $4.8 billion write-down and made some more ominous comments about the auto industry (Reuters)
• A nine-car NASCAR pileup may have wrecked a vehicle sponsored by the Federal Communications Commission, but it gave the agency more mileage in advertising the imminent switch to digital TV signals (Reuters)
• Blu-ray backers are banking on falling prices, summer blockbusters and an ad blitz to get consumers to make the leap to high-definition (NY Post)
• Time Inc has asked for volunteers to get bought out from People, Time, Sports Illustrated, Fortune and Money, as it goes into job cutting mode (AdAge.com)

(Photo: Reuters)