Most media companies report quarterly earnings in a two week span beginning with the last week of the first month of each calendar quarter. Below is a two-part recap of second quarter earnings season that was originally published on the Dow of Steve Blog at SNL Kagan Interactive.

Week One Recap: July 27 – July 31

Entering second quarter earnings seasons media stocks faced a very high bar due to their leadership in the rally off the March lows. Most media stocks entered earnings season trading at post-crash highs with the pace of gains accelerating since first-quarter earnings reports suggested fundamental decline had ceased and management commentary offered hints of recovery.

In general, media earnings reported the last week of July met or exceeded expectations. Trends in advertising and consumer demand for media products and services were quite similar to the first quarter, supporting the idea that media stock fundamentals have reached a bottom. However, there were few signs, if any, that fundamentals have begun to improve. In fact, compared to first-quarter commentary, media management teams seemed less sanguine about a recovery in demand. Given the big run in the stocks, this setup led to selling even though the results themselves were OK and forward estimates are little changed.

Selling of media stocks might have been worse last week except for a strong underlying bid for stocks in general and growing investor acceptance that the economy was beginning to recover. Friday's gross domestic product report showing a decline of just 1% confirms that the economy will likely grow in the second half of 2009. This should provide solace to media investors hungry for improved fundamentals, as most drivers of media demand are sensitive to broad trends in GDP. As a result, barring a negative shift in investor sentiment toward the economy, I do not see significant downside in media stocks relative to the market.

There are still many important media companies that will report earnings this week, including Comcast Corp., DIRECTV Group Inc. (NasdaqGS: ), Scripps Networks Interactive Inc., News Corp., CBS Corp. and the Liberty Media Corp. complex of tracking stocks. I suspect we will hear more of the same, with the best news coming from the cable networks companies and DIRECTV. I also expect the stocks to respond similarly to last week unless any company indicates that demand is actually improving.

Here is a brief recap of the key earnings reports from last week:

Viacom Inc. (NYSE: ) led things off on Tuesday and reported improved results in its cable network business offset by another rough quarter at Paramount and very weak sales of Rock Band video games. Domestic ad trends improved to -6%, 300 basis points ahead of the first quarter. Ratings are also on the upswing offering hope that trends will continue to improve. I was pleased that excluding Rock Band cable network operating margins appear to be improving. I thought Viacom's results would cheer investors. Initially, the stock popped more than 3%, but when it reversed those gains in a few hours, I realized that media stocks faced a tough go of it this earnings season. The expectations bar had been raised too high.

Time Warner Inc. (NYSE: ) followed on Wednesday morning with a better-than-expected report. Most of the gain was fueled by filmed entertainment, with "The Hangover" already benefiting results. Cable networks were a bit better than expected with domestic trends flat, as entertainment networks had positive advertising gains while news networks declined due to tough comps from last year's elections. Analysts and investors were quick to discount the positive surprise by noting that the third quarter was going to prove tougher. Furthermore, analysts pointed out that there were several small one-time benefits that made the numbers look better.