Networks’ Ads Sell Up in Q3 - Multichannel

Networks’ Ads Sell Up in Q3

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Cable-network advertising sales were
up in the third quarter, but programmers were
mixed in their expectations for the future, with some
fearing that weakness in the latter part of the period
could bleed into the last three months of the year.

Discovery Communications, News Corp., Time
Warner Inc., Scripps Networks and Crown Media
Holdings all reported domestic ad-sales increases
in the third quarter, with News Corp. leading the
way with a 13% increase. Most of the content executives
were upbeat about the fourth quarter, although
many cited a growing weakness in scatter-market
pricing.

Discovery, which grew domestic ad revenue by
6% in the period to $322 million, raised its fully
e a r out lo ok
mainly on bettert
han-expected
distribution revenue,
which was up
33% to $350 million
in the period.
That growth was
fueled by expanded
licensing agreements
for library
titles, particularly
$77 million from
a deal with Netflix
announced in September.
Without
the Netflix deal,
distribution revenue
would have
risen 5% in the
quarter.

Discovery now
expects total 2011 revenue to be between $4.175 billion
and $4.25 billion and net income to total between
$1 billion and $1.075 billion.

But it was unclear just how long the good times
will roll.

“I know many of you are concerned about the
ad market going forward,” Discovery CEO David
Zaslav said on a conference call with analysts.
“While it is still too early to comment on 2012, we
have not seen any meaningful cancellations on
options for next year, and current scatter demand
and pricing for the fourth quarter remains strong.”
Other CEOs were even less certain.

At tiny Crown Media, domestic ad revenue rose
9% for Hallmark Channel and 70% for Hallmark
Movie Channel. And though the women-oriented
networks managed to off set lighter scatter pricing
during the latter part of the quarter with higher ratings
and increased carriage, CEO Bill Abbott
said the fourth quarter could see some declines.

“We’re still hopeful that there will be some
last-minute retail and entertainment dollars
that will be spent closer to air date,” Abbott said.
“Overall, we’re not alone. Advertisers committed
a lot more to the upfront this year. The scatter
market, as a result of that plus the economic
trends, is just below where we have seen it in the
last several quarters.”

News Corp., parent of Fox News Channel, FX
and other cable stalwarts, was optimistic about
continued growth, but chief operating officer
Chase Carey said that scatter pricing was facing
some difficulty.

“While we have limited visibility looking
forward, the national market continues to be
solid, although scatter is not quite as strong as it
has been, as scatter premiums have pulled back
slightly” to the high single-digit to low doubledigit
levels above upfront pricing, Carey said.
He added that cancellations of orders for advertising
made in the upfront “are in line with historical
experience.”

Time Warner was faced with a different problem
in the third quarter — domestic ad sales at
its Turner Broadcasting System networks were up
9% for the period, but operating income was down
4% because of higher marketing and programming
costs. The possible loss of the National Basketball Association
season due to the ongoing lockout could
also spel l problems
for its cable
nets. Time Warner
chief financial officer John Martin estimated
that the loss
of NBA games could
reduce growth by
200 to 300 basis
points in the fourth
quarter.

“Now for planning
purposes,
we’re assuming
here that there will
be no NBA games
in the fourth quarter,”
Martin said on
the call, adding that
any loss in ad revenue
would be off set
by lower expenses.

Scripps Networks, which grew domestic ad revenue
by 8.6% to $344 million in the quarter, apparently
saw no roadblocks to growth in the short term. The
company, which owns Food Network, HGTV, DIY,
Great American Country, Cooking Channel and the
Travel Channel, reiterated its full-year guidance of 10%
to 12% revenue growth and 6% to 9% programmingexpense
growth.

Broadcasting & Cable

business editor Jon Lafayette
contributed to this report.

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