Why? For starters, the major studios reached a tentative agreement the with the Screen Actors Guild, thereby avoiding a potentially crippling strike. Meanwhile, for broadcast networks, S&P sees ad demand for the fall TV season generally weaker than a year ago. But S&P expects the longer-term entertainment picture to include development of new distribution mediums for content owners. One other plus: In the year ahead, S&P expects rising DVD sales to bolster movie revenue streams.
Among entertainment stocks, S&P's top picks are AOL Time Warner (AOL
), Liberty Media (LMG.A
), and USA Networks (USAI
), each of which carries an S&P recommendation of 5 STARS (buy). Stocks in the group ranked 4 STARS (accumulate) include Walt Disney Co. (DIS
), Fox Entertainment (FOX
), News Corp. (NWS), and Rainbow Media (RMG
). Graves and Kessler are equity analysts for Standard & Poor's