The cable advertising market, coming off of a strong year in 2007, is expected to slow in the second half of year and into 2009, mainly because of continued weakness in the overall economy, according to SNL Kagan.
In its report “Economics of Basic Cable Networks,” SNL Kagan said industry revenue rose 12.6% to $38 billion and ad sales were up 10.5% to $19 billion in 2007. That momentum continued into the first half of 2008, but Kagan believes that the growth will slow in the back half of the year. Kagan forecasts that cable ad sales growth will dip to 4.7% in 2009, rebounding to 11.1% in 2010 on the back of a strengthening economy.
“This year’s weak economy has resulted in extremely volatile ad markets with major advertisers scrambling to allocate budgets where they will get the most bang for the buck,” said SNL Kagan senior analyst Derek Baine in a statement. “Companies that publicly report ad sales for their cable nets showed positive second-quarter results spanning a wide range from 1% to 28%. However, we expect to start seeing more negative numbers in the second half of 2008.”
SNL Kagan’s 10-year projections for cable networks show slow but steady growth:
-- Total industry multichannel subscribers are expected to grow 1.3% per year, roughly half the rate witnessed between 1998 and 2007.
-- Total industry ad revenue is expected to increase at an annual rate of 8.1%, slower than the 11.6% posted over the previous decade.
-- Total industry revenue is expected to grow 8.9% per year, with affiliate fees decelerating to a growth rate of 9.5% per year over the next 10 years versus a 16.1% growth rate over the previous decade.
-- Total industry cash flow is expected to grow at a compounded annual growth rate of 10.8% per year, reaching almost $40 billion by 2017.
-- The average industry cash flow margin is expected to rise from 36.4% in 2008 to 42.5% by 2017.