Rainbow Poised For Ad Growth

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Pali Research media analyst Richard Greenfield was encouraged by Rainbow Media Holdings president Josh Sapan's comments to bondholders during a recent conference call, which indicated that Rainbow's nations networks — AMC, WE: Women's Entertainment and the Independent Film Channel — still have room to grow on the advertising front.

According to Greenfield's report, Sapan said at the March 20 conference call that national advertising averaged about 8 minutes per hour for AMC and 10 for WE. “I do think there is headroom in that inventory load,” Sapan said, according to a transcript.

In contrast, Greenfield wrote that mature U.S. cable networks average between 12 minutes and 14 minutes per hour of national advertising (with two minutes each hour set aside for the cable operator). He also was pleased about Sapan's comment that cost per thousand homes for the Rainbow networks are increasing in the high single and low double-digit range, about what the company expected.

“These comments bolster our confidence that AMC/WE/IFC revenue and Rainbow [cash flow] growth will achieve, if not exceed our high single-digit forecast for 2006,” Greenfield wrote.

But Greenfield noted that there could be some downward pressure on growth from the renegotiated AMC carriage agreement with Time Warner Cable and increased investment in original programming.