It’s Good to be A Cable Network

While most of the media business has taken a pounding from the recession, a relative bright spot has been the cable network business.
In fact, Michael Nathanson, a senior analyst at Bernstein Research, has issued a new report headlined “It’s Good to Be a Cable network.”
Nathanson says that ratings continued to shift from broadcast to cable during the third quarter, with cable networks capturing a record 7% share of adult 18 to 49 year old viewers in primetime.
The biggest gainers from a corporate perspective were Scripps Networks Interactive, up 24% thanks mainly to Food Network, and Discovery Communications, increasing 11% because of boosts at TLC and Animal Planet.
Even in these difficult times, Nathanson expects that ad revenue increases will follow ratings growth.
“We believe that the scatter market for national TV advertising improved sequentially in the third quarter, driven by tighter supply and improved pricing,” he says in his report. More demand from automakers and retailers also helped. “The longer-term investment controversy remains how robust will the 2010 advertising recovery be if the consumer remains under pressure due to high unemployment and a potential jobless recovery,” he added.
Nathanson expects ad sales growth for cable networks to come in at 2.9% for 2009, up from an earlier estimate of 1.1%. He’s expecting a 2% to 3% increase in 2010.
As a result of an improved ad sales outlook he’s raising his target share price for several companies that own cable networks, including Viacom, Scripps and Discovery.