Mercifully, not all Canadian media stocks deserve to be covered in a black shroud during the current market gloom. A surprising number of steady-as-she-goes Canadian companies have survived the recent market debris.

Sure, Canwest Global Communications continues to get hit from all sides as its debt woes mount and investors remain unclear whether the company knows how to fix its business. But investors have rewarded companies like Astral Media and Corus Entertainment for owning specialty and pay-TV channels whose revenue from predictable subscriber fees has helped offset the impact of the continuing advertising downturn, on their radio stations especially.

RBC Capital Markets analyst Drew McReynolds recommends a buy on both Astral and Corus, with a one-year target of $30 for Astral (TSX: $23.91, with a 52-week high of $39.98)* and $17.50 for Corus (TSX: $13.00/$21.53). And market cues like these can help you decide who to safely do business with until the economy recovers. After all, in today’s economic climate, analysts and investors are no different than anyone else in preferring sure bets over uncertain risk.

‘The market really has a segment-by-segment tone,’ observes CIBC World Markets analyst Bob Bek. ‘There’s concern over ad weakness over the whole space. Ad declines on newspapers and conventional TV will be worse, radio will be flat, and specialty TV channels will be up 5%,’ he speculates.

Now, if you’re not a direct investor in a Canadian media stock, why should you care what analysts say, or whether share prices go up or down? Because stocks are like personal relationships: if you see a future in one you’re already in, you’ll remain emotionally invested. And if you don’t see a future, you’ll pack your bags and walk.

And all manner of Canadian film and TV businesses are built on relationships that help players decide which partners and their projects fit best with their own. So Canwest’s shares tipping into penny stock territory (TSX: $0.35/$6.11) is the latest sign investors have baled on a company they believe can only now sell assets at possibly fire-sale prices to stay solvent. The uncertainty is just too great.

‘Canwest is in the most challenging spot because of high debt levels and assets in conventional television and newspapers that are declining in value,’ argues Ben Mogil, a media analyst with Thomas Weisel Partners.

The way Moody’s Investors Service tells it, a worsening ad climate and rising debt will leave Canwest with too little cash to keep anxious lenders at bay. Unless Canwest sells off prized assets like Australia’s Network TEN, it faces a cash crunch in 2010 when it needs to unwind its deal for the former Alliance Atlantis specialty channels by possibly buying out partner Goldman Sachs & Co. Analysts also give Canwest failing marks for not selling the controlling stake in TEN earlier to help finance the purchase of the AAC channels.

‘The signs seem ominous,’ Credit Suisse analyst Randal Rudniski said in a Feb. 2 note. ‘A Chapter 11 [bankruptcy protection] filing is certainly a possibility, although we think it’s more likely that it seeks to find a remedy for its high debt leverage without court protection in order to preserve the current control structure.’

The market has also punished media companies with exposure to retail CD and DVD sales, both businesses that suffer when consumers pull back on discretionary spending.

Shares in Lionsgate are the latest to go into freefall and face analyst downgrades in a brutal environment for DVD sales – a key profit driver for movie producers. Lionsgate stock slid 27% to $3.90 after it posted sharply lower third-quarter earnings – a share price the company has not seen since 2003.

Rival E1 Entertainment has seen its shares on London’s AIM exchange slide 80% in the last year to around 20 pence ($0.35), and more recently had to pull plans for a Toronto Stock Exchange listing. After restructuring its E1 Music division stateside, E1 also launched a strategic review to find other ways to raise shareholder value, including possibly taking the company private, though CEO Darren Throop insists no assets will be sold or spun off.

There have been painful pratfalls for other producers and distributors, including Peace Arch Entertainment (TSX: $0.07, with a 52-week high $1.17) and DHX Media (TSX: $0.62/$1.65).

But let’s return to other market winners. These include cable giants like Shaw Communications and Rogers Communications, and phone giants like BCE and Telus that have wireless phone and high-speed Internet access businesses whose revenue streams are mostly locked in. That means investors and analysts can better predict whether these companies can deliver on promised earnings.

Each is a diversified market play, with verticals in specialty TV, high-speed Internet and wireless and digital phone – all growth engines for the companies. And, besides their steady cash flows from subscriber fees, the cable and phone giants continue to post above-average dividends.

Investors have also been kind to cross-platform players like Rogers (TSX: $32.50/$50.50) and Quebecor ($18.00/$38.09). Sure, they’re exposed to the publishing and conventional TV ad downturn. Rogers surprised investors with a fourth-quarter loss after it posted a non-cash impairment charge of $294 million to write down the value of its free, over-the-air TV business owing to ‘recessionary declines in advertising revenue.’

At the same time, being part of larger cable and wireless phone groups offers Rogers and Quebecor a buffer in bad times. And that’s good news to indie producers that want to keep launching their programming on Canadian schedules, and want to ensure their business partners will be around when the economy recovers.

After all, the main theme for indie producers will remain through the recession: less ad revenue for domestic broadcasters means less program commissioning and lower licence fees.

Other market picks: the recession has also so far been good news for exhibitors.

Stock in big-screen pioneer Imax (TSX: $5.33/$8.32) is well up from a 52-week low of $3.10 last November when it got caught up in the market buzz saw. Jeffrey Blaeser of Morgan Joseph says Imax’s stepped-up transition from a film-based platform to digital projection technology, combined with a joint-venture business model to spread its risks and costs, has enabled it to weather the economic downturn.

As at Imax, so too with Cineplex Galaxy Income Fund (TSX: $13.81/$17.97): less exposure to Hollywood duds and more blockbuster releases, strategic pricing and the introduction of premium-priced digital 3D movies has helped shore up its share price.

However, TWP’s Mogil does not believe Cineplex Galaxy is recession-proof. Movie product tied to Hollywood and not the economy has performed. But Cineplex’s in-theater advertising business remains ‘vulnerable’ to the recession, though likely will grow modestly as advertisers continue to shift dollars out of conventional TV and newspapers.

How long Canadian media stocks can continue to levitate through the recession is uncertain, especially as big U.S. stocks are increasingly missing earnings projections as they post steep losses on their own asset write-downs. CIBC’s Bek says Canadian media stocks will suffer if a late-spring, early-summer upturn in the Canadian advertising market that many are predicting never materializes.

At the same time, Bek insists the multiples on big Canadian media stocks – what the market is willing to pay for each dollar of annual earnings – never reached the lofty heights that their U.S. counterparts did during better times.

‘The Canadian media sector is similar to the U.S. market, but the valuations have very little overlap,’ he argues. ‘The Canadian base of assets is built for lower highs and higher lows.’

As a result, should the Canadian economy continue to falter and ad revenues decline, Bek doesn’t see big media stocks suffering or sliding to the degree that they could south of the border.

* All financials as of 5 p.m., Feb. 20, 2009, unless otherwise stated