Advertising growth is slowing down overall in 2012, but TV is doing better than expected, according to a new report by Michael Nathanson of Nomura Securities.
For TV in 2012, Nathanson is projecting 7.4% growth, up from his earlier estimate of 6.6%. He sees the Big 4 broadcast nets growing 5.7% compared to his earlier estimate of 3.9%. He’s leaving national cable unchanged at 6% growth. Syndication is set to grow 4%, unchanged from the old estimate. Local stations will show a 10.3% pop in ad revenues, stronger than the 9.3% gain originally forecast and local cable will be up 10.1%, better than 9.1% forecast earlier.
But overall, he sees advertising growing only 4.9% in 2012, down from an earlier estimate of 5.5%, with traditional media (no Internet) increasing just 2.4% compared to 2.7% earlier.
For 2013, Nathanson is lowering his ad growth estimate to 2.9% from 3.2% because of tough comparisons with political advertising and the Olympics occurring in 2012.
He sees television advertising up just 0.9% in 2013. He sees cable up 6% and syndication growing 4%. But he sees the Big 4 broadcasters flat, local stations down 5% and local cable flat.
Nathanson says that according to earnings reports, ad growth slowed to 4.6% in the second quarter from 5.8% in the first quarter. He notes that advertising is operating in what he calls a “three-speed world,” with online showing double-digit growth, TV growing at a mid- to high-single-digit rate and everything else flat to down.
As far as investors are concerned, “we continue to believe that upside to earnings estimates from advertising surprises is unlikely and recommend stocks with structural growth drivers like near-term affiliate fee renewals.” On that basis, Nomura likes Disney and News Corp. It also recommends Viacom on a valuation basis.
Google is Nomura’s top pick in the online advertising space.