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Our Outlook for the Media Sector

There was plenty of M&A activity in the second quarter.

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Most of the media companies that we cover derive a significant amount of their revenue from advertising, and the first quarter extended a trend we've observed for some time and expect to continue--a shift in ad dollars from traditional media to digital media. In fact, ad expenditures for network television, newspapers, and radio were lower in the first quarter of 2007 than in the same period a year ago, down 7%, 5%, and 2%, respectively, while ad spending on the Internet grew by 17%, according to TNS Media Intelligence. What's even more remarkable about the Internet-spending figure is that it doesn't include dollars related to search.

Michael Corty does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.