LOS ANGELES - ENTERTAINMENT media stocks dropped on Friday as Viacom and CBS slashed profit forecasts, and Sumner Redstone's theatre chain announced it would sell Viacom and CBS shares to pay down debt.

Shares of Viacom, owner of Paramount Pictures and MTV Networks, nose-dived 17.3 per cent, or US$3.58 (S$5.31), to close at US$17.10, while CBS plummeted 20.1 per cent, or US$2.04, to US$8.10.

Both Viacom and CBS blamed slumping advertising and a weakening economy in cutting their forecasts for the year.

'Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets,' Viacom Chief Executive Philippe Dauman said in a statement.

Viacom said its full-year net earnings from continuing operations would grow in the 'mid-single to low double-digit' percentage range, down from the 'low double-digit' growth it predicted in July, based on a 2 per cent decline in global ad revenues.

The outlook is based on earnings of US$2.36 per share in 2007.

The company said it expects to see adjusted diluted earnings in the third quarter between US$0.53 and US$0.55 per share.

CBS, however, said it expects 2008 adjusted operating income before depreciation and amortisation to decline in the mid-teen percentages versus 2007, down from a July forecast of growth in the low single-digits.

The company's OIBDA in 2007 was US$3.2 billion.

Excluding one-time items, CBS expects to report third-quarter adjusted earnings per share of US$0.42 to US$0.44, compared with US$0.51 in the period a year ago. It expects 3 per cent revenue growth.

It also said it would take a non-cash impairment charge of US$14 billion in the third quarter to reflect a decreased book value for its radio and TV stations.

CBS reports third-quarter earnings on Oct 30, while Viacom reports on Nov 3.

To add to the selling pressure, movie theatre operator National Amusements said on Friday that a subsidiary plans to sell US$400 million of its nonvoting shares in Viacom and CBS to pay down debt.

All three companies are controlled by Redstone.

The subsidiary expects to sell approximately an equal dollar value of Viacom and CBS nonvoting shares.

Near the end of the day, Standard and Poor's analyst Tuna Amobi raised his rating on both CBS and Viacom to 'hold' from 'sell' based on their low stock prices, with Viacom down 60 per cent and CBS down 69 per cent since the beginning of the year.

Earlier, UBS analyst Michael Morris cut the target price for Viacom to US$27 from US$35 and lowered his estimate for earnings per share in fiscal 2008 by US$0.11 to US$2.51.

Mr Morris said despite Paramount distributing summer hits like Iron Man and Indiana Jones and the Kingdom of the Crystal Skull, he expected to see 'weakness for smaller titles and TV DVD sales in the fourth quarter and into 2009.'

He also expected domestic cable ad sales growth at Viacom to underperform growth at its peers.

Mr Morris also slashed ad revenue, DVD sale and profit outlooks for other major companies.

Time Warner shares fell 8.9 per cent, or US$0.90, to close at US$9.19. News Corp shares closed down 8.1 per cent, or 75 cents, at US$8.46; Walt Disney shares fell 3.2 per cent, or 76 cents, to US$23.04. -- AP