[opendtv] TV’s Troubles Aired Out During Earnings Calls | Broadcasting & Cable
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 18 Nov 2014 08:46:00 -0500
http://www.broadcastingcable.com/news/currency/tv-s-troubles-aired-out-during-earnings-calls/135677
TV’s Troubles Aired Out During Earnings Calls
During their third-quarter earnings calls, the captains of the television
industry felt they needed to push back against the growing sentiment that the
fundamentals of the business are eroding.
Based on numbers they reported, the ad market was weak. The question is whether
or not that weakness is temporary or a longterm result of falling ratings,
competition for eyeballs from overthe- top entries and a shift of marketer
spending from traditional commercials to digital video.
“We believe ad-supported TV is in the early stages of a structural decline,”
said Sanford Bernstein analyst Todd Juenger in a research note last week.
Juenger downgraded CBS and Discovery. “The content companies, however, are in
denial—selling more content to SVOD to offset ad revenue shortfalls, which
accelerates the problem. We expect increased content investment, against a
declining domestic end market, will reduce ROI and margins over time.”
At the same time, execs had to explain how they would take advantage of digital
opportunities to distribute their valuable content without tearing apart the
cable bundle that generates the subscriber fees that have powered earnings
since the recession.
Some executives were blunt. “My first observation is that these concerns are
overblown, particularly in the short-term,” said 21st Century Fox COO Chase
Carey. The television ad market is a mixed story, but the issue is primarily
the economy.
The traditional cable bundle “continues to have real legs,” Carey insisted,
“But [while] all the concerns may be overblown today, these are real issues
that while challenging also present real opportunities for us.”
Carey said he looked at this period of change as “a glass-half-full
opportunity. There’s a real chance for us to build exciting new areas of growth
if we can create more exciting choices for customers, and a more valuable
proposition for advertisers while maintaining a discipline that enables us to
manage the trade-off required to ensure fair value for our product.”
Meanwhile, the Walt Disney Co., under CEO Bob Iger, has been an early mover
when it comes to digital distribution. But Iger cautioned that you don’t want
to push change to the point “where you are endangering your own business model,
which is already facing a fair amount of challenge.”
Iger allowed that some “may call that a conservative approach.”
According to analyst Michael Nathanson of MoffettNathanson Research, ad revenue
went from flat in the second quarter to down 0.5% in the third quarter,
producing what he said was the worst quarter for ad growth since the recession,
after adjusting for the Olympics.
In that environment it’s not surprising that Time Warner, Scripps Networks
Interactive and AMC Networks all discussed plans to reducepersonnel costs.
Some executives were bullish on the fourth quarter. “Advertising is growing
again here in the fourth quarter. Our local businesses have benefited from some
tough political campaigns,” said CBS CEO Les Moonves.
Others were more cautious, saying agencies were buying time later, making it
harder to gauge where ad sales were likely to settle.
“The fact of the matter is the next five or 10 years in basic entertainment
cable as it relates to ratings are going to be much more difficult than the
last five to 10 years, simply because it’s more competitive and there’s more
technological change out there,” NBCUniversal CEO Steve Burke said.
Nathanson also sees more trouble ahead. “We were surprised with the end of Q3
and start of Q4 that the ad market didn’t show some renewed vigor. With the NFL
back on the air, with premium CPMs and steady audience growth and
marketers—especially autos and retail—looking to the eight-to-10 weeks before
Christmas to move product in hopefully an improving economy, it is very
troubling that the ad market is so slow 4Q,” he said.
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