The analysis today from Nomura Equity Research’s Michael Nathanson could dampen the mood at TV networks as we head into the big upfront ad sales season. The most startling discovery: total ad revenues didn’t grow at all in 2012 at the Big Media companies he tracks. Declines at Viacom and News Corp outweighed gains at Discovery and Scripps Networks while sales were “essentially flat” at CBS, Disney, and Time Warner. “Given the surge in media stocks, the aggregate 0% growth was somewhat surprising,” Nathanson says. Factoring out political and Olympics-related ads in 2012, he sees ad sales at the companies growing 3.6% in 2013. But the analyst is “cautious” about his forecast. The pickup in the U.S. economy has been “weak” and the ongoing budget stalemates portend “an uncertain economic future.” Meanwhile Internet-based media are taking market share, and driving ad rates down. “In effect, online advertising — specifically online display advertising — is enabling advertisers to reach their ‘eye-ball targets’ with less (and sometimes even no) ad dollar budget growth.” For example, last year media and entertainment companies cut their ad spending 4.2% — even as box office sales hit a record high. Nathanson also warns that auto companies won’t increase ad spending as much as they did last year as they tried to make up ground they lost during the recession. With ad growth slowing, Big Media likely will feel more pressure to raise the prices they charge pay TV distributors — putting pressure on them to raise subscribers’ monthly bills. Once CBS separates its billboard business, and News Corp and Time Warner spin off their publishing operations, ad sales will account for just 27.4% of all revenues at the companies Nathanson covers, down from 30.6% last year.
TV Advertising Is “Surprisingly Weak” Due To Internet And Economy: Analyst
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