Barrington Research analyst James Goss on key takeaways from Q4 earnings
Barrington Research media and entertainment analyst James Goss spoke with Over Most Of These Stations Wednesday about his impressions following the latest round of earnings for media conglomerates.
On the depressed Nielsen ratings for the broadcast networks, and the potential impact on this year’s upfront, though the companies tried to sound as optimistic as they could about advertising demand:
“You always have to position yourself going into upfront season, but you never know exactly how it’s going to turn out. I would think there’s more pressure on them than there has been [in recent years], because obviously there are a lot of different ways to view some of the same content.
From a corporate perspective, it might matter less that there’s something that could bite them a little bit on the broadcast side, if they can then sell some fully depreciated content to Netflix and Amazon and the other .”
Goss noted that CBS was able to offset much of the ratings problems it had during the first half of the 2012-13 season with ad sales related to the election cycle, as well as sales of time for Super Bowl XLVII and its pre- and post-game shows, as broadcast revenue rose 3% in Q4.
On the networks’ desire to make C7 the primary currency for ad rates, rather than C3, now that a number of shows get ratings boosts of as much as 50% over the course of seven days:
It will still come down to how time-sensitive an advertiser’s needs happen to be, he said. Retailers and movie studios will want to be sure that potential customers see ads within a couple of days. “But if you’re selling Tide, and someone sees an ad for Tide seven days later, rather than three days, rather than live — what difference does it make?”
Where the industry stands on TV Everywhere, after the initiative’s momentum slowed down last year:
Goss is convinced that programmers and pay-TV distributors still see value in the concept and want to make it work. “I wanted to see a basketball game during the middle of earnings season, and while I was on the rain, I was able to see part of the game on my iPhone using the WatchESPN app. Having these options do allow you to capture things you wouldn’t be able to otherwise, and might extend the reach of advertisers.
Cable companies are sometimes left for dead because of the assumption that people are going to cherry pick the shows they want to see without subscribing to a big package of channels. Goss is among those who thinks the big players are going to get paid, one way or another. “Time Warner Cable and Comcast know that they’re not just video providers; they’re broadband providers. If somebody streams 13 hours of ‘House of Cards’ on Netflix, and whatever else, there’s going to be usage-based pricing that takes that into account.”
On whether there’s a movement toward divesting of non-television assets, as News Corp. spins off its newspaper publishing businesses, Time Warner distances itself from most of Time Inc. and CBS looks to sell its outdoor business.
“There may be more pressure on these management teams to figure out, ‘What are the best horses to create a growth profile, and therefore the best stock price.”
Goss pointed out that Comcast is conglomerating while much of the industry is doing the opposite. Tellingly, though, it is doing so with an enterprise in NBC Universal that is primarily focused on television and film production and distribution, the kind of assets that remain the focus of the big companies that are divesting.
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Goss is impressed with CBS and Lions Gate Entertainment. He thinks CBS Chief Executive Les Moonves is moving in the right direction with retransmission fees, reverse compensation and other avenues that allow the company to generate more revenue from its content that is not directly tied to advertising.
Lions Gate is a favorite for several reasons, including the company’s success with the “Twilight” and “Hunger Games” franchises. While the “Twilight” series is ending, there are three more movies on the way in the “Hunger Games” saga.
“And they have other franchises they hope to create,” Goss said. “They’ve really cracked the big leagues. They’ve been very smart about it. Instead of trying to compete with the other studios on July 4th weekend, they’ll use March or November. Instead of trying to compete with Warner Bros. on primetime [broadcast] network series, they’ll look at cable.
He pointed to the company’s ’10-90” proposition with FX, in which they proposed that if the first 10 episodes of the Charlie Sheen sitcom “Anger Management” reached a certain ratings level, FX would order 90 more episodes, assuring the series of the magic 100 needed for syndication. The show did reach its ratings goal, and FX did order another 90 episodes.
— David B. Wilkerson