The media economy is a big deal on Wall Street, weighing in at 7% of the S&P 500 . . . bigger than consumer staples or energy, nearly as large as the manufacturers that produce actual stuff and worth only a little less than all the utilities, materials and real estate stocks put together.

And the sector as a whole is in free fall, down 41% YTD and dropping 9% just in the past month. There are some great companies in there, starting with AT&T (T), Disney (DIS) and the newly expanded T-Mobile (TMUS).

But there are some huge problems there too. Start with the biggest stars of the sector, the online ad networks. Alphabet (GOOG) and Meta (META) add up to a breathtaking 46% of just about any size-weighted communications portfolio . . .

. . . shrinking $250 billion in the past month. Earnings were terrible and hope is wearing thin that they’ll get better any time soon. When your two biggest stars go cold, your portfolio starts looking like nuclear winter.

Winter isn’t “coming” in online advertising. It’s here. And while that’s a catch phrase best associated with the Game Of Thrones franchise over on HBO, I have to say conditions over at corporate parent Warner Discovery (WBD) make winter look relatively balmy.

WBD hasn’t been an independent stock long enough to make the big index funds, which is actually a godsend. If they had to buy the IPO back in April, they’d be stuck with about 2% of their assets tied up in a company that’s dropped nearly 60% in its brief lifetime.

That’s grim. Luckily, at this stage, it’s going to take a long time before WBD becomes a prominent enough player in the sector to move the index funds. The company remains both a big deal in Hollywood, but that clout just hasn’t done anything for shareholders.

In effect, WBD has become a vanity stock or even something like a meme stock, moving more on sentiment and prestige than the tangible business proposition. I’d avoid it.

GOOG and especially META have a lot in common with that at this stage. Buy META if you believe in your heart that Zuckerberg’s “metaverse” is awesome. Buy GOOG when you can get it below 16X earnings (i.e., as a value and not a growth stock) or when management gives up on growth altogether and authorizes a dividend program.

But here’s the crucial thing: factor these three stocks out and the communications sector looks pretty good. It isn’t growing in this economy, but earnings compression is extremely limited outside these three stocks.

Add these three pain points back into the numbers and it looks like a catastrophic season for the sector, with size-weighted earnings coming in 22% below where they were last year. Ouch.

If you love the media, don’t buy the index until the credits finally roll. Either GOOG and META need to shrink a lot more . . . or the rest of the sector needs to grow into their currently massive footprints.

Both scenarios argue against owning META or GOOG. Own DIS instead. Own Netflix (NFLX) if you want a TV channel. Don’t worry about WBD eating its lunch at this point. Management over there is too busy cutting costs and alienating viewers.

Own T. They made the right call cutting WBD loose.