Terrible TV ratings will be major concern as media conglomerates report results
The biggest media and entertainment companies are about to report earnings for the December quarter, beginning with Viacom Inc. on Thursday morning.
As Sanford C. Bernstein analyst Todd Juenger pointed out in a Tuesday note, investors will be wondering just how badly television’s advertising market has been damaged by the terrible ratings across all of the broadcast networks, with the exception of NBC (which was bolstered by “Sunday Night Football” and its talent series “The Voice.”).
Time Warner Cable (covered by Sanford C. Bernstein’s Craig Moffett) also reports earnings on Thursday. Next week will see quarterly reports from Walt Disney Co. after the market closes on Tuesday; Time Warner Inc. on Wednesday morning and News Corp. after the market closes.
Juenger wrote: “How is the demand environment holding up? What visibility do we have? Should we be worried? It seems like over the past year the intensity of those questions has been stronger than ever, given the high level of uncertainty about the macro environment combined with the unprecedented volatility of ratings.”
Broadcast network ratings have been eroding for years, as competition from cable, DVD, video games and the Internet has siphoned off viewers. Now, however, the unprecedented variety of on-demand programming, from Netflix, Hulu, cable operators, and other sources, has combined with time-shifted viewing via digital video recorder to set up big ratings declines in the 18-49 demographic so prized by advertisers.
At CBS, the perennial leader in total viewers, ratings in the 18-49 age group were down by 9% in the fourth quarter of 2012, compared with the same period a year earlier. Disney’s ABC, the decline was 8%, and at News Corp.-owned Fox, viewership in the key demo plunged 25%. Only NBC, now controlled by Comcast Corp., escaped the carnage, up by 14%.
The situation for “live+same day” ratings has deteriorated to the extent that media-company CEOs want to move away from that traditional measurement in favor of “C7” ratings, which measure viewership of programs seen up to seven days after the air date.
Advertisers aren’t sold on that idea, knowing that their commercials are often skipped in a DVR environment.
Juenger said he is “cautiously optimistic” on advertising demand in the current quarter.
Meanwhile, the analyst noted that the networks have contracts in place with pay-TV distributors that assure them of healthy retransmission fees, one of the main reasons why stocks in this sector did very well in 2012.
Juenger also observed that “cord-cutting remains a hypothesis rather than a reality.” Though video subscription growth isn’t what it was several years ago, cable operators aren’t hemorrhaging customers, in the way newspapers have lost print subscribers.