Cable Ad Growth Expected to Dip in Q4


Cable-network advertising revenue
is expected to rise at a slower pace in the
fourth quarter, bogged down by sports lockouts
and ratings glitches at some networks, off-setting the double-digit increases of their peers.

Ad revenue in the period is expected to reach
double-digits at AMC Networks (15%); Scripps
Networks (14%) and Discovery Communications
(15%), according to Morgan Stanley media
analyst Ben Swinburne, while Time Warner
Inc. and Viacom are expected to report growth
in the low single digits.

Viacom was scheduled to report earnings on
Feb. 2, followed by The Walt Disney
Co. (Feb. 7); Time Warner Inc. and News Corp.
(Feb. 8); SNI (Feb. 9); Discovery Communications
(Feb. 16); and Liberty Media (Feb. 23).

Two top analysts covering the
cable-networks sector — Swinburne
and Miller Tabak’s David
Joyce — anticipate that the slowdown
that was evident in the first
three quarters of the year will continue.
Ad sales on average grew by
20% in the first quarter, dipping to
11% in the second quarter and 7%
by the third quarter. Swinburne expects
that cable advertising growth
will dip slightly in the fourth quarter,
to about 6%.

At the same time, affiliate-fee
revenue is expected to remain stable.
Swinburne predicts revenue from carriage
fees will rise about 9% in the period, in line with
the 8% to 10% growth in the prior three quarters.

Time Warner has been impacted by fewer
National Basketball Association games — a
lockout of players was resolved in December,
resulting in a 66-game season, down from its
traditional 82 — and should report ad-revenue
growth of 1.6% to 2.5%, according to estimates.
Viacom, which has blamed a glitch at ratings giant
Nielsen for two straight months of low ratings
at Nickelodeon, which Nielsen disputes,
was expected to report ad sales growth in the
1% to 2% range.

With strong ratings from shows like The
Walking Dead
, AMC Networks is expected to
grow ad revenue in the 10-15% range, according
to the analysts. The network has stepped
up spending for original content at its flagship
AMC channel, a move that Swinburne called
“the right strategy to compete in an increasingly
crowded landscape.”

However, he added it could pressure margins,
especially if the ad market slows.


Scripps Networks should continue to ride a ratings
wave. Swinburne predicted ad sales will
rise 14% in the period, while Joyce anticipated
a 13% increase.

Scripps renewed about 25% of its carriage
deals for Food Network and HGTV at the end
of the year — presumably at favorable rates, according
to Joyce. And the programmer has further
upside potential. About half of the deals for
its newest offering, the Travel Channel, expire at
the end of 2012, with the rest coming due at the
end of 2013, he wrote in a recent report.

At Disney, Swinburne expects that cable ad
revenue will actually decline 3% in its fiscal
2012 first quarter ended Dec. 31, (most likely
due to the impact of the NBA lockout on ESPN)
although for the full fiscal year ad sales should
rise 4.1%.

Joyce predicts that media networks revenue
should rise 7.1% to $4.97 billion in the period,
with segment operating income up 21.7
to $1.3 billion.

At News Corp., Fox News Channel — which
recently crossed its 10th consecutive year atop
the cable news ratings, is expected
to fuel a 10% overall increase in ad revenue for
the fiscal first quarter ended Dec. 31.