Fitch: Outlook for U.S. Media & Entertainment Stable for 2012

NEW YORK: Fitch Ratings’ 2012 outlook for the U.S. Media & Entertainment sector is stable, according to the credit agency’s latest report, which cites that OTT services are not expected to lead to widespread cord-cutting in the year ahead. 

The outlook predicts that media companies have enough financial flexibility to withstand "elevated macroeconomic risks" next year. Media conglomerates’ diversity and exposure to cable networks were one factor cited as a contributor to the stability and cash flow. Fitch said that high margins and low capital requirements will continue to drive free cash flow, providing a "significant cushion" to potential economic pressures.

The Media & Entertainment sector will see modest growth in advertising spending next year, boosted by a banner year for political advertising. Fitch does not expect a double-dip recession, though if one does occur the firm believes ad spending next year could decline substantially more than gross domestic product.

Fitch predicts that over-the-top technologies will remain largely incremental. Video content on tablets is also expected to remain largely incremental and benefit content providers and aggregators. "The ability to aggregate large audiences will keep traditional media players relevant," the report states.