Media
July–September results preview
 Investment view — Overall end-H1 advertising demand was limited, and we
think advertising companies will continue to struggle in H2. Still, with sector
share prices below book, we see limited scope for downside, so we remain
neutral on the sector. We doubt ad spend is going to increase much over the
medium term, so we would need to see new earnings sources established
before turning bullish.
 TV ad outlook — The decline in Tokyo region TV spot revenues is narrowing
more than expected. We assume a YoY decline of 8% in October and still look
for a rebound in July–September 2010. Time revenues are worsening more
than expected, and we project continued harsh numbers in line with April data.
 Results preview — Spot revenues at the private broadcasters have not
deteriorated as much as they had planned, and we see OP coming in above
targets as costs reductions outpace their plans. We similarly forecast aboveplan
OP at the ad agencies on the back of additional cost reductions even
though we understand sales undershot targets.
 Stocks to watch — We recommend the broadcasters, which are set to bask in
the benefits of a recovery in high-marginal-profit spot revenues, over the ad
agencies, which are affected by the overall advertising market. We remain
bullish on Nippon Television Network and Fuji Media Holdings. We view them
as core beneficiaries of a pickup in broadcasting revenues, as the former is set
to maintain a high share of spot advertising and the latter has strong appeal in
the younger viewer segment, where it commands top viewer ratings.
 Focus — Focal points include growth in non-broadcasting revenues via the
multipurposing of content and the acquisition of earnings sources other than
ad spend as ad agencies transform into solutions businesses.