Tough Comparisons Drag at Programmer Earnings

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Advertising-sales growth likely cooled in the
first three months of the year for most cable programmers,
partly due to unfavorable comparisons with the prior year.
Cable networks, for the most part, were likely to have continued
an upward ad-sales trajectory, though, with the notable
exception of Viacom.

Viacom is expected to report a decline in domestic ad sales of as
much as 2.5% in its fiscal second quarter ended March 31, according
to some analysts, due to declining
ratings at its flagship MTV and Nickelodeon


Viacom’s Nickelodeon lost the monthly
kids’ ratings crown for the first time
in March to Disney Channel, which
had been narrowing the gap for several
months prior. Disney Channel reported
a 2.6 total-day cable rating (2.2 national)
in the kids 2-11 demographic for the
month, versus a 2.4 cable rating (2.1 national)
for Nickelodeon.

Nick’s ratings have been slipping
since November, which Viacom has
blamed on glitches in the Nielsen process (which the ratings service
has denied).

The slippage isn’t limited to Nickelodeon. According to Nielsen, firstquarter
ratings for MTV were down 19% among adults aged 18 to 49.

Ratings issues have plagued broadcasters and cable networks

During four television weeks starting March 19, broadcast networks
NBC lost 3% of viewers in the 18-49 age category, CBS lost
8%, ABC 21% and Fox 20%, while cable networks shed 2%, according
to a recent article in The New York Times. Analysts and programmers
alike are wondering if those viewers are watching more
TV online, on-demand or not at all, Joyce added.

That decline is likely to make the impending upfronts — the period
in which advertisers commit to buy ads for the fall TV season
— more challenging.

“What’s happening now in the ratings is going to have a ripple
effect starting next year, because it’s going to mean that
this upfront ad-sales season isn’t going to be anywhere near
as robust as it was last year,” Miller Tabak media analyst
David Joyce said.

Upfront pricing could be in the mid-single-digit percentage range,
Joyce estimated, compared to last year’s low-double-digit increases.

On the whole, domestic ad sales are expected to climb about
9% for cable networks in the March quarter, about half of the
increase during the same period in the prior year. While strong
growth is expected from Discovery Communications, ratings
and other factors are expected to temper growth at other cable

Time Warner Inc. is scheduled to kick off the programmer
earnings season on May 2, with ad sales expected to
climb in the 2.5% to 3% range, well below the 31% increase
in the same period last year. Most of that gap is due to difficult
comparisons to the prior
year: 2011 was the first year
of its 14-year deal with CBS for
expanded coverage of the NCAA
men’s basketball tournament.
While ratings for the most recent
March Madness were the
strongest in 18 years, up about
4%, last year rat ings for the
tournament increased 12%.

On the plus side, the National
Basketball Association lockout,
resolved in December, actually
added more games in the first
quarter for networks like Time
Warner Inc.’s TBS (up 33% in ratings
in the March quarter), helping ad sales.

The Walt Disney Co. is expected to grow ad sales by about 14%
in the quarter, fueled by ratings juggernaut ESPN. That lags last
year’s 33% ad sales gain, but again comparisons were tougher.
Last year, ESPN’s ratings were boosted by the college football
Bowl Championship Series, which aired for the first time on the
network in January.


News Corp.’s ad-sales growth is also expected to slow to about
10% in the quarter, down from 14% a year ago, due to lower ratings
at some of its channels.

Other programmers are expected to see less-dramatic declines.
Scripps Networks Interactive, home to the Food Network,
HGTV and the Travel Channel, is expected to see its ad sales to
grow 5.5%-9% in the period, slightly behind 12% growth in the
prior year.

“With new shows and strong ratings, we expect Food to be the
largest contributor to ad growth for SNI in ‘12/’13 as ratings are
better monetized at this year’s upfront,” Joyce said. “We see less
risk in the consensus view of 2Q12 sequential ad growth acceleration
at SNI, given the ratings trends.”