Media Industry Feels pain of GM Bankruptcy

Advertising agencies, newspapers and magazines, television and radio stations, and Web sites will lose hundreds of millions in GM advertising dollars from the fallen American industrial icon. Those losses will likely translate into more corporate restructuring in the form of possible layoffs or divestments to protect the bottom lines of these media companies. In fact, GM's largest unsecured creditor claiming trade debt is not an auto parts maker, but an advertising company. Chicago-based diversified advertising group Starcom MediaVest Group Inc. is listed as the sixth-largest unsecured creditor with a claim of $121.5 million. Starcom's claim exceeds bankrupt auto parts maker Delphi Corp.'s claim of $110 million. Meanwhile, Starcom is not the only advertising company making the top 50 list of unsecured creditors. Paris-based advertising agency Publicis Group SA is owed $25.2 million of unsecured debt, followed by $15.9 million to Interpublic Group of Cos. and $4.6 million to McCann Erickson of Calgary, Alberta. While the bankruptcy documents list advertising agencies, it doesn't elucidate the impact on the media companies. The advertising agencies are the intermediaries who deal with the media companies. In order to understand the impact on media companies, you must look at the crumbs left in news stories and SEC filings. Look for media stocks with heavy newspaper investments such as Gannett Co., E.W. Scripps & Co. and New York Times Co. to also feel more pain from a loss of GM auto advertising dollars in their already slowing ad revenues. In the first quarter, classified ad revenue fell 39% at Gannett, 42% at New York Times and 43% at E.W. Scripps. The GM bankruptcy is possibly going to force a shakeout in the industry with some smaller companies that relied on auto-related revenue to seek a merger to survive and bigger players to become more creative to fill the GM loss.