The money is flowing again into Big Media. Just about every media CEO who recently spoke to Wall Street analysts about this year’s 1st Quarter earnings said that ad sales are up and consumers are spending. “Viacom has never been stronger financially,” CEO Philippe Dauman crowed. At Disney, where net profits fell slightly, CEO Bob Iger expressed he was “confident in the trends we’re seeing across our segments”. So will these companies do more hiring and give out raises? Don’t be naive. Dauman, for one, told investors that he’s “watching for head count creep” while the company returns $1.9 billion to shareholders over the first 9 months of its fiscal year. Most Big Media companies are buying back their stock, making publicly held shares more valuable. CBS doubled its quarterly dividend to shareholders and Viacom plans to follow suit.
Here are some of the other major themes from this earnings season:
TV Advertising: Network executives were predictably upbeat about what will happen in their upfront ad sales negotiations in coming weeks. Disney CEO Bob Iger predicted the market will be “strong”. NBCUniversal chief Steve Burke upped that to “very strong”. And News Corp COO Chase Carey claimed it’ll be “truly strong”. Their pronouncements made CBS chief Les Moonves sound refreshingly bold when he projected “solid double-digit increases” in ad sales for his broadcast network. Executives cited the price increases they’ve seen in scatter sales as the economy has improved and auto, technology, telecom, and insurance companies introduce products or fight to build market share. Still, some CEOs are concerned that Japanese auto and consumer electronics companies will cut their ad buys in the face of rolling blackouts and parts shortages following the country’s recent earthquake and tsunami. And just when the auto ads were starting to return, TV station owner Gray Television says it’s already seeing “sizeable auto dealer cancellations”.
Movies: Box office sales were so bad in 1Q that some studio executives didn’t bother trotting out the usual excuse – that their new films only look bad due to “difficult comparisons” with last year’s successes. Burke said that Universal’s slate “underperformed plan”. Disney admitted that Mars Needs Moms was “very disappointing”. No wonder studio owners and exhibitors urged investors to look ahead to this summer’s 41 wide release films which include more higher priced ticket Imax and 3D movies than last year. Also, they stress, the 3D films cover a broader variety of genres than last year when the format was overwhelmingly used for family fare. The top execs once again have put their faith in sequels including Disney’s Pirates Of The Caribbean: On Stranger Tides and Cars 2, Warner Bros’ The Hangover Part II and Harry Potter And The Deathly Hallows, Dreamworks Animation’s Kung Fu Panda 2 and Paramount’s Transformers: Dark Of The Moon. Meanwhile, DVD sales continue to plummet.
Premium VOD: Studios uniformly characterized this initiative as little more than a test that shouldn’t hurt theaters. But exhibition companies remain livid over the prospect of seeing movies appear on cable or satellite VOD just 8 weeks after their debut in theaters. “Our message to the studios has been, when you went less than 90 days [to VOD], you changed your model — and I’m not happy with that,” Cinemark CEO Alan Stock said. Theater chain executives say they’re engaged in private negotiations with studios to see if they can avoid an all- out war.
Netflix: The party line from the Big Media companies is that they’ll gladly take Netflix’s cash if it wants to license their dusty old TV re-runs for its Internet streaming service. The deals won’t be exclusive, and are designed to ensure Netflix remains a supplement to cable and not an alternative. But the top execs weren’t specific about the shows that they’d refuse to sell – except for Time Warner which says it won’t let Netflix have anything from HBO. The bottom line is that this remains an on-going story as Netflix tests the studios’ resolve, making lucrative offers to license the rights to more recent and popular fare.
Olympics: As you’d expect, the major TV networks say they won’t overbid for the rights to air the 2014 and 2016 Olympics – a decision that could be made as soon as June. Burke says “we’re not going to do anything that doesn’t have a business plan that pencils out to a positive” value for the company. But he, Iger, and Carey broadly hinted that the only way to win the auction and still make money is to put a lot of the events on a cable channel and then charge cable and satellite companies a higher license fee to carry them. Iger says that ESPN — which cable operators say already charges too much — “would definitely generate incremental subscription revenue” if it had the Olympics.