Programmer Ad Sales Slowed in Second Quarter

Analyst Expects Cable Gains in 2nd Half, But Still Below 2013 Levels

Soccer, zombies and, to a lesser extent, Mad Men helped prop up a sluggish second-quarter advertising market for cable networks.

Overall, national TV advertising was up about 4.4% in the second quarter, down slightly from a 4.7% gain in the first quarter, according to Pivotal Research Group media analyst Brian Wieser. Much of that growth was due to gains at The Walt Disney Co.’s ESPN, where ad sales were up 10% due to record ratings for the FIFA World Cup during the period, and AMC Networks, where advertising revenue was up 11.3% in the quarter, bolstered by perennial hit zombie drama The Walking Dead.

Mad Men, which is airing its final half-season next year, showed weaker-than-expected live ratings for its season opener on May 25 — total viewers were 1.9 million, down from 3.4 million in its sixth-season opener — but it had significant gains in the live-plus-3-day category, where viewership doubled from the prior year.

After a disappointing upfront, with volume lower than expected due to the economy, cable network executives said advertisers were holding back dollars for the scatter market. Other content companies saw ad sales decline from the previous year.

Viacom reported 1% domestic ad-revenue growth, compared with expectations of a 6% lift in U.S. ad sales.

Time Warner Inc.’s Turner Broadcasting System networks also reported 1% domestic ad growth, down from an 11% rise in the prior year, but that was in line with consensus estimates.

At 21st Century Fox, overall ad sales rose by just 1%, but that was mainly due to an 11% decline in broadcast ad sales: Fox’s cable-network ad revenue rose 12% in the period.

Rounding out the sector, Scripps Networks Interactive reported a 6.5% rise in domestic ad sales, down from a 10% gain in the same period a year ago.

Time Warner Inc. chief financial officer Howard Averill recently said scatter pricing for the company’s entertainment networks was up in the mid-single digits above the upfront. But Averill told analysts that he expects overall ad growth to be flat to down (in the low single digits) in the third quarter.

Wieser argued that although down, ad performance wasn’t as bad as it could have been.

“There isn’t any kind of radical or enhanced secular change going on right now beyond the trends that have been going on for many years,” Wieser said in a note.

On the cable side, Wieser predicted ad revenue would rise about 4.8% in Q3 and by 5.1% in Q4. Those estimates are below 2013 second-half growth, when ad sales rose 8.3% in the third quarter and by 4.9% in the fourth quarter.

“The issue is not why 2014 will be relatively bad, but instead why 2013 was relatively good,” Wieser said. Last year, he said, was the anomaly, “not this one.”