SEE DISCLOSURE APPENDIX OF THIS REPORT FOR IMPORTANT

DISCLOSURES AND ANALYST CERTIFICATIONS.

U.S. MEDIA OCTOBER 19, 2007

Weekend Media Blast: Is MySpace Getting Swift Boated?
Michael Nathanson (Senior Analyst) • michael.nathanson@bernstein.com • +1-212-756-4451
Craig Moffett (Senior Analyst)• craig.moffett@bernstein.com • +1-212-969-6758
Jeffrey Lindsay (Senior Analyst) • jeffrey.lindsay@bernstein.com • +1-212-407-5990
Drew Borst • drew.borst@bernstein.com • +1-212-756-4656
Judah Rifkin • judah.rifkin@bernstein.com • +1-212-756-4557
Michael W. Parker • michael.parker@bernstein.com • +1-212-823-8460
Aaron Byrd, CFA • aaron.byrd@bernstein.com • +1-212-407-5953
Brian T. Nowak • brian.nowak@bernstein.com • +1-212-969-6649

By Michael Nathanson
Heading into the 2004 Presidential Election, a key "positive"
element of John Kerry's biography was his military service record
which resulted in three Purple Hearts, a Bronze Star, and a Silver
Star. Given that the country was (and still is) at war, many
political analysts expected that Kerry's admirable record of valor
would lead him to victory.
Of course, as happens in life, the unthinkable occurred. Due to the
effort of a quickly-formed organization named the Swift Vets and
POWs for Truth, Kerry's account of his service account was called
into question and his "positive" attribute was turned into a
"negative." To their credit, the Swift Vets used the tools of new
media to their benefit. The issue was unearthed not by traditional
avenues like The New York Times, CNN or CBS News, but by a
self-motivated interest group who built a nice web site with cool
pictures, produced and aired their own documentary on the subject
and bought spots on cable news networks. All were very effective
strategies to get their message out. Soon, Kerry's military record
became an "issue."
So, what has this got to do with media, you ask? Fair question.
We don't intend to sit in judgment of John Kerry or the Swift Vets;
rather, we see a new paradigm in how financial markets get
information and how that information impacts our markets. Take
News Corp., for example.
As many investors know, Rupert Murdoch pulled off a massive
coup in July 2005 when he paid $580 million to acquire a little-
known company called Intermix, which owned 53% of a web-site
called MySpace and had an option to acquire the balance. At that
point in time, MySpace had 21 million unique users in the U.S.,
and has now grown to over 68 million.
The success of MySpace, which is housed in News Corp.'s Fox
Interactive Media division, has been identified by us as a key
driver of profit, along with Sky Italia and News Corp.'s cable
networks, in fiscal 2008 and 2009. On News Corp.'s last earnings
conference call on August 8th, Mr. Murdoch alluded to the
impending strength of these assets when he said:
"In the 12 months prior to our acquiring MySpace, the site
generated $23 million in revenue. Today on the back of its
durability and success, we are forecasting that MySpace alone will
generate in excess of $800 million in revenue in fiscal '08.
Overall, FIM in fiscal '07 generated revenues of $550 million and a
profit of $10 million, even after absorbing $80 million in retention
and amortization costs. We would be surprised if FIM revenues
this fiscal year do not exceed $1 billion with margins well above
20%."
Last month, at an investor conference on September 18th, Mr.
Murdoch was asked by Goldman's Anthony Noto about this
statement and was a bit less emphatic.
Noto asked, "Where are you in terms of monetizing MySpace as
advertising inventory? I know you have a relationship with
Google. You said you'll generate more than $800 million in
advertising this year. Can you give us a little bit of context about
the $800 million - how much will be from non-Google revenue?"
Mr. Murdoch's response: "Did I say 800? I probably did. Okay."
So against this rather "positive" (like Kerry's war record) backdrop,
enter the new world order. On September 28th the Silicon Alley
Insider website published a report by Peter Kafka that made many
question the accuracy of what we thought. The report, entitled
"News Corp. Internet Unit FIM Missed July, August Revs," said
that FIM "missed its internal revenue targets for July and August,
several sources say. Unless FIM has an extraordinary September,
therefore, it will miss Q1." In the next paragraph, the report went
on to say that: "More broadly, we understand that people on FIM's
sales team feel that the $1 billion FY08 goal for the division that
Rupert Murdoch laid out in August won't be attainable without
some kind of financial engineering."
Later, deeper in the report, the writer both lays out the implications
of FIM's miss on other online players (i.e., bad for AOL, Yahoo!,
Facebook), but rightly hedges himself that September could offset
the first two months and that the shortfall is immaterial to earnings.
However, the seeds are sown that MySpace's growth appears in
trouble.

BERNSTEIN RESEARCH OCTOBER 19, 2007

 WEEKEND MEDIA BLAST: IS MYSPACE GETTING SWIFT 2

BOATED?
So with this as background, the negative sentiment on MySpace
reached a crescendo yesterday. First, in a posting on Silicon Alley
Insider titled "Did Murdoch Cut News Corp.'s Internet Goals?"
Kafka reports that another website (Valleywag) reports that
Murdoch, appearing at the Web 2.0 conference reduced his
revenue forecasts by 20%. Kafka than adds that Murdoch may be
setting two targets for FIM – the first at $750 to $800 million in
revenues next year and then a $1 billion stretch goal that could be
tied to senior executive contracts. The posting also cites their
previous reporting of FIM's weak July and August sales and notes
that the downgrade to expectations is a logical extension of this.
Like the Swift Vets, these comments entered the main stream
debate as many clients called and e-mailed us yesterday to see if
News Corp. had indeed reduced guidance on both MySpace and
FIM. In this case, some clients had been alerted to this posting by
certain brokerage salespeople looking to re-affirm their own
negative view of News Corp. In short, a small degree of panic set
in and NWS shares started to fall.
Realizing the brouhaha this story caused and News Corp.'s quick
denial of Murdoch's actions, Silicon Alley Insider, consulting with
Reuters, rechecked the audio transcript of the Web 2.0 presentation
and found that Murdoch had said that he projected MySpace
revenues of $750 million next year, which indeed is lower than the
$800 million affirmed on the last earnings conference call in
August. In essence, even if this is accurate and was his intention,
Murdoch reduced his revenue targets by $50 million on a company
with an estimated $32.2 billion in total revenue for FY08! That's a
1.6% reduction. Even the Silicon Alley Insider acknowledged that
this was not as significant as first thought.
But, the reporting of this action – done without investors or
analysts in the room – and further unspecified "insider" reports of
weak July and August revenues has taken a positive element of the
News Corp. story and raised near-term doubts. These doubts have
been aided by recent MySpace traffic statistics showing stagnate to
declining unique visitor growth. Sequential growth in monthly
U.S. unique visitors was only 0.1% in September and sequential
growth was -1.2% in July and -1.8% in August.
Our belief is this: Our estimate for FIM's FY08 operating profit to
grow from $10 million in FY07 to $263 million in FY08 is mostly
predicated on the step-up in Google search fees from an estimated
$50 million in FY07 to $250 million in FY08E. Our estimate for
MySpace's display advertising to grow by 75% to $541 million in
FY08E is a contributor as well. We have assumed that the growth
in display advertising will be driven predominantly by an
improvement in monetization rates vs. a step-up in usage trends.
Clearly, this is a new business model with a somewhat
unpredictable outcome. However, we believe that as advertising
networks, like Advertising.com, seek out cheap, low-CPM remnant
inventory, MySpace's positioning at the bottom of the pricing
ladder will drive revenue growth.
Whether these reports about MySpace are true or not, we will have
to wait and see. Similar types of "reports" last week about Yahoo!
ultimately proved to be erroneous after its quarterly results came
out. This is the new world. It makes our job as equity analysts and
investors more difficult and will likely drive increased stock
volatility, particularly in the very short-term. It will also make the
truth more valuable than ever. MN
Quote of the Week: Promise... or Threat?
"I underscore that I am completely prepared to continue to lead
the company into the future as a public company if the transaction
is not approved."
-- James Dolan, President and CEO of Cablevision Systems,
October 16, 2007
Source: Multichannel News, 10/16/2007
Current Company Views & Weekly News
U.S. Media Conglomerates (Nathanson & Borst )
DIS M: Tough studio comps in FY07 and waning momentum at Parks and ABC
NWS O: Fastest earnings growth in group and lowest forward PE
TWX O: Catalysts include Cable IPO and better than expected results at AOL
VIA O: Superior brands transcend distribution shifts; estimate appear achievable
CBS M: Assets have structural growth issues; risk that CBS network will mean revert
CCU M: Bid appears to fair; do not expect other bidders to emerge
Global Advertising Agencies (Nathanson, Borst & Nowak)
OMC O: Best mix of assets and should post the highest long-term growth rates.
IPG M: Less diversified asset mix leads to slower growth and higher risk.
WPP.LN O: Attractive asset mix and best-in-class cost management.
U.S. Telecom, Cable & Satellite (Moffett , Parker & Rifkin)
CMCSA O: Compelling value, expect positive catalysts in 2006 around VoIP rollout.
CVC O: Lower than expected capital intensity to translate into attractive FCF yields.
DISH U: Facing significant cost disadvantage relative to cable's "triple play."
Expect multiple compression as subscriber growth decelerates.
DTV U: Facing significant cost disadvantage relative to cable's "triple play."
Expect multiple compression as subscriber growth decelerates.
TWC: O: Solid sector bet. Valuation on par with Comcast.
T: M: Continued earnings growth will get more difficult with key drivers –
wireless margin expansion and synergies – priced in or starting to run dry.
VZ: M: FiOS investment drags down ROIC for entire company long term.
S: M: Long term turn-around story. High sub-prime exposure creates real short
term risk.
U.S. Internet (Lindsay & Byrd)
AMZN M: Higher margin third party sales drive overall operating margins higher
EBAY O: Strong growth in PayPal and non-GMV businesses plus big share buybacks
GOOG O: Revenues from new initiatives (GMail, Apps, YouTube) drive continued growth
IACI M: Problems at HSN are intractable, bearish on TicketMaster, bullish on Ask.com
YHOO M: Right Media and Panama are pluses, but loss of DSL subs will hurt
This Week’s Reports (available on Firstcall or
bernsteinresearch.com)
• TWX: As We Enter The Home Stretch, More Questions Than Answers 10/15
• YHOO, EBAY, GOOG, AMZN, IACI | Our Expectations for the Upcoming
Quarterly Earnings Reports
• YHOO | Long on Style, Short on Substance - Some Upside From Alibaba and 10/17
Yahoo! Japan but Core Business Still Flat
• Initiating Coverage on U.S. Telecom: Show Me the Money... Capital Discipline
Will Determine Winners and Losers
• EBAY | Strong Q3 Performance Gets Skyped but Guidance Suggests Good 10/18
Q4 - Reiterate Outperform, PT $42
• U.S. Broadcast: New Media Math; Does Your Head Hurt Yet?
• GOOG | Revenue Locomotive Still at Full Power Plus Strong Margin Recovery 10/19
- Raising Price Target to $720

BERNSTEIN RESEARCH OCTOBER 19, 2007

 WEEKEND MEDIA BLAST: IS MYSPACE GETTING SWIFT 3

BOATED?
• AMZN: 3Q Earnings Report
• OMC: 3Q Earnings Report
This Week’s Rating / Price Target Changes
• CMCSA: 3Q Earnings Report 10/25
• TWX: Price target raised to $22.50 from $21.50 10/15
• YHOO: Price target raised to $29.00 from $25.00; 2007E EPS raised to 10/17
$0.44 from $0.43 Risks
• Initiating coverage on U.S. Telecom: Risks to media, cable and satellite companies globally include execution, economic and
T: Price target $47; VZ: Price target $44; S: Price target $21 technological. Any economic weakness will hurt the advertising market and these consumer
• EBAY: 2007E EPS raised to $1.48 from $1.37; 2008E EPS raised to $1.61 10/18 cyclicals. Technological changes will transfer value in to, from and between companies.
from $1.59
• GOOG: Price target raised to $720 from $625; 2007E EPS raised to $15.55 10/19
from $15.33; 2008E EPS raised to $21.05 from $20.35

Next Week’s Calendar

• U.S. Telecom Launch Conference Call 10/22
• T: 3Q Earnings Report 10/23

Valuation Exhibit 1: U.S. Telecom, Cable & Satellite Valuation Summary (Moffett, Parker & Rifkin)
EV/2007E EBITDA
SCB 10/18/2007 Target Prem. YTD Shs Mkt Cap Current Target Current Target
Ticker Rating Price Price (Disc.) Rel. Perf. Out. ($ MM) Consol Consol Cable/DBS Cable/DBS
CMCSA O $24.07 $34.00 41% -23% 3,164 76,145 8.3x 11.5x 7.7x 10.9x
CVC O $31.97 $40.00 25% 4% 292 9,325 9.7x 9.6x 8.3x 9.2x
TWC O $33.01 $46.00 39% -28% 977 32,257 8.1x 10.5x 8.1x 10.5x
DISH U $49.73 $40.00 -20% 22% 453 22,512 9.0x 6.8x 9.0x 6.8x
DTV U $26.06 $19.00 -27% -4% 1,234 32,157 7.6x 5.9x 7.4x 5.6x
SPX $1,540.08

EV/2008E EBITDA P/FE (2009E)

SCB 10/18/2007 Target Prem. YTD Shs Mkt Cap Current Target Current Target
Ticker Rating Price Price (Disc.) Rel. Perf. Out. ($ MM) Consol Consol Consol Consol
S M $17.62 $21.00 19% -15% 2,772 48,843 6.6x 7.2x 12.4x 13.9x
T M $41.81 $47.00 12% 8% 6,099 254,999 6.4x 6.2x 16.0x 15.7x
VZ M $44.97 $44.00 -2% 12% 2,903 130,548 5.8x 6.6x 16.7x 19.9x

BERNSTEIN RESEARCH OCTOBER 19, 2007

 WEEKEND MEDIA BLAST: IS MYSPACE GETTING SWIFT 4

BOATED?

Valuation Exhibit 2: U.S. Media Conglomerates & Global Advertising Agencies (Nathanson, Borst & Nowak)
2008E
Target FCF FCF FCF
10/18/07
Current 2008E 2008E Rel. Target Yield Yield Yield
Rating Price EPS P/E Mult* Price Upside 2007E 2008E 2009E
US Media Conglomerates
Disney M $34.78 $2.17 16.0 115% $41.00 17.9% 6.3% 6.9% 7.7%
News Corp. (NWS.A) O $22.06 $1.49 14.8 120% $24.50 11.1% 5.4% 7.5% 9.7%
Time Warner O $18.37 $1.17 15.7 n/a $22.50 22.5% 6.6% 8.4% 8.3%
Viacom (VIA.B) O $40.22 $2.63 15.3 115% $46.00 14.4% 6.2% 7.1% 7.7%
CBS Corp. M $29.41 $2.07 14.2 100% $31.00 5.4% 8.8% 8.6% 8.9%
Clear Channel M $37.96 $1.61 23.6 n/a $37.00 -2.5% 6.1% 6.9% 7.9%

Global Advertising Agencies

Omnicom O $52.83 $3.27 16.2 110% $59.00 11.7% 5.8% 6.3% 7.0%
Interpublic M $10.14 $0.63 16.1 100% $12.25 20.8% 1.8% 7.6% 10.7%
WPP (U.K.) O £6.94 £0.52 13.3 110% £8.60 23.9% 5.9% 6.9% 7.7%

S&P 500 1,540 $97.00 15.9 5.8% 6.2% 6.5%

MEMO:
* Target prices are based on 2008E relative PEs except for TWX and CCU, which are based on sum of the parts.

Valuation Exhibit 3: U.S. Internet (Lindsay & Byrd)

10/18/2007 YTD Rel. Market Target 2008E 2008E

Company Rating Price Performance Cap ($M) Price Upside EPS P/E
Amazon.com O $89.85 127.7% 37,108 $102.00 13.5% $1.78 50.5x
eBay O $38.10 26.7% 51,740 $42.00 10.2% $1.61 23.7x
Google O $639.62 38.9% 202,760 $720.00 12.6% $21.05 30.4x
IAC/InterActiveCorp M $29.25 -21.3% 8,863 $33.00 12.8% $1.83 16.0x
Yahoo! M $29.35 14.9% 39,329 $29.00 -1.2% $0.51 57.5x

BERNSTEIN RESEARCH OCTOBER 19, 2007

 Disclosure Appendix
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versus the MSCI Pan Europe Index for stocks listed on the European exchanges - unless otherwise specified. We have three categories of
ratings:
Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.
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• As of 10/10/2007, our ratings were distributed as follows: Outperform/Buy - 41.5%; Market-Perform/Hold - 47.1%; Underperform/Sell -
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• Accounts over which Sa ford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, and/or their affiliates exercise investment discretion
own more than 1% of the outstanding common stock of CMCSA / Comcast Corp, DIS / Disney, TWX / Time Warner Inc, VIA / Viacom Inc,
VIA/B / Viacom Inc, CBS / CBS Corp, WPP.LN / WPP Group PLC, IPG / Interpublic Group of Cos Inc, GOOG / Google Inc, EBAY / eBay
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• Sanford C. Bernstein & Co., LLC currently makes a market in CMCSA / Comcast Corp, DISH / EchoStar Communications Corp, TWX /
Time Warner Inc, AMZN / Amazon.Com Inc, EBAY / eBay Inc, YHOO / Yahoo! Inc, IACI / IAC/InterActiveCorp.
• The following companies are or during the past twelve (12) months were clients of Bernstein, which provided non-investment banking-
securities related services and received compensation for such services DIS / Disney, TWX / Time Warner Inc, VIA / Viacom Inc, VIA/B /
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