Top Programmers Cheer Q2 Results

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The advertising market continued to
roar for cable programmers in the second quarter,
with several reporting double-digit gains domestically,
building on momentum that started to show
signs of life late last year.

Viacom, Discovery Communications and the Hallmark
Channel all reported double-digit domestic adsales
growth in the April-June frame, building on
gains that began in the fourth quarter last year. Time
Warner Inc. reported the lowest increase at 8%, slightly
below the 11% gained in the first quarter.

Crown Media, parent of the Hallmark Channel, had
the biggest increase in domestic ad sales — 16% to $57.9
million — via a robust upfront and scatter-market pricing.

On a conference call with analysts, Crown CEO Bill
Abbott said that scatter pricing for Hallmark Channel
was 73% above upfront pricing and 43% above the upfront
for Hallmark Movie Channel.

Viacom appears to have cracked the code on monetizing
its content online — online distribution sales,
likely to Netflix or other online competitors, helped fuel
a 19% increase in affiliate-fee revenue in the period.

“Importantly, this is the first example of a cablenetwork
business demonstrating clear and significant
revenue potential from online distribution of largely
library content,” Morgan Stanley media analyst Ben
Swinburne said in a research note. “While these revenues
will likely be lumpy, consistent with our ‘connected
TV’ thesis there is likely to be more ahead as
new entrants emerge, including moving from library
sales to live linear streaming.”

At media networks, including MTV, VH1, Comedy
Central and Spike TV, operating income rose 27% to
$1 billion on a 16% increase in revenue to $2.4 billion
in the fiscal third quarter that ended in June. Domestic
ad revenue was up 12% after a fiscal secondquarter
increase of 11% and a 10% rise in the fiscal
first quarter.

At Discovery Communications, U.S. networks ad revenue
rose 10% in the second quarter, building on a 9%
gain in the first quarter and a 13% gain in the fourth.
Overall revenue rose 11% in the period to $1.1 billion.

For the full year, Discovery expects total revenue of
$4.075 billion to $4.175 billion, ahead of the previous
guidance of $4.03 billion to $4.13 billion. Net income
is projected at about $1 billion.

At Time Warner Inc., revenue rose 10% to $7 billion,
its highest growth rate in almost four years. Ad
revenue was up 8%, including an 11% gain at Turner
Broadcasting System.

Chairman and CEO Jeff Bewkes said in a statement
that a strong upfront for its cable networks and strong
at HBO helped
drive growth.

Revenue for
the networks
group rose 9%,
to $3.45 billion
from $3.17 billion.
were up 7%, ad
revenues were
up 11% and content
were up 18%.