Air Ball: NBA Lockout Throws Ad Sales Off Targets

But News Corp., Disney, Time Warner Encouraged by Ratings, Scatter Pricing

By Mike Farrell -- Multichannel News, 2/13/2012 12:01:00 AM

The National Basketball Association lockout in December helped drive down advertising sales at three top cable network conglomerates in the calendar fourth quarter, but the resumption of the games, as well as some signs of recovery in the overall economy, have some network executives optimistic about a better run in 2012.

The Walt Disney Co., News Corp. and Time Warner Inc. all reported quarterly results last week, with Disney’s perennial ratings giant — sports network ESPN — reporting flat ad sales, mainly because of the lockout. The same held true at Time Warner Inc., which relies heavily toward the end of the year on NBA ratings for its Turner Network Television, where ad sales rose 2%.

The NBA reached a deal with players in November, and regular- season games resumed on Dec. 25, but the group truncated the 2011-2012 season to 66 games instead of the traditional 82 games.

The pain was lessened at News Corp. — where exposure to the lockout at its Fox Sports regional sports networks was eased by strong performance at its Fox News and FX channels — with domestic advertising revenue up 6%. Excluding its RSNs, ad sales at the cable nets would have risen 14% in the period, the company said.

Strong affiliate fee growth helped off set the sluggish ad market at all three companies. At Disney’s cable networks, a 16% increase in carriage fees helped drive an 8% rise in revenue and a 25% increase in segment operating income in the quarter. Domestic affiliate fees rose 9% at News Corp. and increased an estimated 5.2% at Time Warner in the quarter.

But the return of NBA games on Dec. 25, and some signs that macro-economic factors like housing starts were showing improvement, encouraged the programmers, which all see ad growth accelerating in the coming quarters.

On a conference call with analysts last Wednesday, Time Warner chief financial officer John Martin said ad growth was tracking in the mid-single digits, refl ecting positive ratings at most of its cable networks. Scatter pricing also is trending above upfront levels, although volume is lagging that of recent years.

Th e other programmers also were encouraged by ad trends — Disney said ad revenue at ESPN was pacing up single digits and it expects the sports juggernaut to have a strong fiscal second quarter.

And though ESPN aired 29 fewer NBA games in the December quarter, it will finish the season airing the same number of contests as the prior year.

“The trends that we’re seeing in advertising are good,” Disney CEO Bob Iger said on a conference call with analysts Feb. 7, adding that it has already sold out the 84th Annual Academy Awards on Feb. 26 and ratings for the NBA are up almost 40% from the prior year.

“I would say the advertising marketplace is healthy,” Iger said.

News Corp. chief operating officer Chase Carey said on a conference call Feb. 7 that ad sales in the March quarter are trending up in the double-digit percentage range at FX and in the mid-single-digit range at its RSNs.

“The advertising markets, while not as robust as they were six-plus months ago, remain solid,” Carey said on a conference call with analysts.

Martin said the NBA lockout could have a longer-term effect on Turner ad sales; ad dollars that went elsewhere during the period when no games were played could take a while to return to the normal advertising cycle.

That lack of optimism is, perhaps in part, due to TNT losing about seven NBA games for the season as a result of the work stoppage. TNT will air about 45 games this season, compared with 52 games last year. ESPN will air 75 games, and NBATV will have 96 games, the same number of contests as their pre-lockout schedules.

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R. Thomas Umstead (programming editor) and Jon Lafayette (business editor, Broadcasting & Cable) contributed to this report.