With few exceptions, even those companies reporting solid gains see ad slowdown for fourth quarter and even longer
By Steve McClellan and Liz Rathbun -- Broadcasting & Cable, 10/29/2000 7:00:00 PM
WhileUSA Networks Inc. reported solid profit growth for the third quarter-22% for developed assets (including the cable networks, Ticketmaster and Hotel Reservation Network)-company CEO Barry Diller warned of an advertising slowdown in the fourth quarter and beyond.
"I absolutely believe there will be a less vibrant advertising [economy] for a period of time," Diller told analysts last week.
A week earlier, News Corp Chairman Rupert Murdoch had warned of a slowdown, while Time Warner Inc. Chairman Gerald Levin said he didn't foresee any problems.
Meanwhile,Sonyreported a 57% drop in fiscal-second-quarter net profit, to $118 million, which the company attributed largely to the cost of developing its much anticipated PlayStation 2 videogame console.
The profit drop, reported Thursday, Oct. 26, caused Sony shares in the U.S. (traded as American Depository Receipts on the New York Stock Exchange) to fall $4.37, to $90.75.
Sinclairreported an 8% gain in revenue to $174 million for the third quarter, with a 4% broadcast-cash-flow gain, to $80 million. Sinclair President Barry Drake said there continues to be "real softness" in the national-spot market. Excluding revenue from political advertising, Sinclair will have fourth-quarter revenue growth of 2% and a 2% rise in cash flow.
Drake said the political season wreaks havoc with the national-spot market: "Regular advertisers stay away." Sinclair's national-spot business was down 2.5% (excluding political ads) in the third quarter, "and it won't be nearly that good" in the fourth, he said, adding that 55% of total sales were local.
In radio,Citadel Communicationssaid it may have to sell some of its stations, most of which are in midsize markets, to lower debt and thus please investors. Chairman Larry Wilson made the comment as he released disappointing third-quarter numbers. At least five analysts downgraded the company's stock. More than 6.6 million shares changed hands Wednesday, Oct. 25, as Citadel's stock price plunged 46.1%, to a 52-week low of $8.625 per share.
Part of Citadel's problem was that it unexpectedly lost $2 million worth of advertising in September. In addition, an expected $1 million increase in national sales turned into a $200,000 decline compared with September 1999, Wilson said. Citadel's loss for the first nine months of this year totaled $19.5 million, compared with a loss of $3.5 million in the same period a year earlier.
Clear Channel Communications, the nation's No. 1 radio company, reported record revenue of $1.6 billion, up 98% over the $796.2 million a year earlier, before it merged with former No. 1 group AMFM and with SFX Entertainment. Radio-only revenue was up 48%. "Local and network revenues were the biggest contributors to our increased sales," the company said. After the report, Wall Street knocked Clear Channel's stock price down by 6.2%, to $52. The price rose to trade at $53.375 the next day.
Infinity Broadcasting's net revenue hit a record $1.03 billion, up 66.4%, while radio-only revenue grew about 13%, to $541 million, the company reported. Net income of $111 million stayed the same, helping drive the stock price of the nation's No. 2 radio group down 1.5% on Monday, Oct. 23, to $29.75 (it was up to $30.125 the next day).
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