Last week’s media stock implosion reflected an overdue recognition that cord-cutting is hurting media companies’ core television businesses. But there’s another risk that deserves more attention: Debt levels among major media companies have crept up to levels that could become worrisome if their business continues to deteriorate.
What makes this particularly noteworthy is that most of the media companies haven’t taken on debt for expansionary moves like acquisitions or big investments. Instead, they’ve been borrowing more and more to fund stock buybacks, which they see as an easy way to keep their stock prices aloft. Investors have been big supporters of buybacks but there are signs that’s beginning to change as they focus more on the shaky fundamentals of the business.