While their technology cousins have been staging a modest recovery, there was more bad news yesterday (Wed, Jan 17) for media shares. ABN Amro, the giant Dutch owned investment bank, downgraded its investment ratings for the shares of most of Europe's media industries.

ABN said the best value to be found is among business publishers and the worst among broadcasters. In downgrading a slew of 22 companies, ABN said that there are now serious questions about advertising sales growth and the remaining value of the media sector's internet assets.

In the week that followed the greenlighting of the AOL Time Warner merger, the bank said: "The recent underperformance of the sector reflects the evaporation of the convergence and internet value applied to media companies, rather than a derating of their underlying businesses. With the outlook for advertising deteriorating we believe fundamental valuations are at risk."

ABN was at its most cautious concerning Italian printer Mondadori, UK publishing and TV group Pearson, Germany's ProSiebenSat1 broadcast company, UK radio group Capital and UK media owner United Newspapers. It said that groups like Granada Media and consumer publishing groups like EMAP (owner of Screendaily.com) are vulnerable to advertising growth, which ABN now pegs at only 5.5%. It has previously issued "reduce" advice on Mediaset and Dutch cable giant UPC.

German broker, Commerzbank Securities today turned negative on UK broadcasters Carlton and Granada. It said that a combination of stagnating advertising volumes and slowing growth at their jointly owned ONdigital subsidiary were responsible for the downgrade. ONdigital yesterday announced that it had signed up its millionth customer, but many brokers were quick to point out that the "churn rates" produced by cancellations also remain high.

There was one piece of good news as Merrill Lynch upgraded the media sector to "neutral" from "underweight" speculating that it could be helped by interest rate cuts.