First-quarter results and second-quarter projections offered little evidence that the advertising market is actually back, but media chiefs from Rupert Murdoch to Leslie Moonves are sounding more upbeat about the second half to come.
“The key takeaway is that every major media conglomerate executive is saying the worst is behind us, or that there's stability or that there are signs of improvement in local and national,” says David Joyce, media analyst with Miller Tabak. “The second quarter may have the same kind of negative results as the first, but the second half is showing signs of improving.”
'Terrible by any measure'
And all the optimism came despite another round of earnings that saw most metrics pummeled. “The quarterly numbers were terrible by any measure,” wrote Natixis Bleichroeder media analyst Alan Gould in a note about CBS on May 8, though it could have applied to media earnings in general. However, the analyst is projecting that CBS revenue will improve on better advertising results and significant syndication revenue in the back half of the year.
The big questions for all players as broadcast upfront week approaches are how much better will it get and what inventory to hold back for scatter. Earnings calls showed that it isn't just networks and stations having a tough time in the ad market. While cable networks have been seen as the growth driver inside big media companies, many looked a little shaky on the ad sales side in the first quarter. At Viacom, ad revenue was down 9%; at News Corp.'s cable stable, it dropped 6% (but is predicted to be up 2% by year-end). ESPN was down in the “high single digits,” according to Disney. Meanwhile, Scripps Networks Interactive saw a drop of 4.6% and Hallmark Channel was down 2%.
There are exceptions. Cablevision's Rainbow Media pulled in an 8% uptick in ad revenue, while Discovery Communications also beat the market with domestic ad sales operations up 2%.
Despite the feeling that things might be getting better, BIA Advisory Services issued a report last week projecting that TV station revenue in 2009 would dip below $20 billion for the first time in six years. This year's figure is expected to be $17 billion, a drop of 21%.
“Since 2003, TV revenues have held steady but are now beginning a dramatic downward shift,” says Mark Fratrik, VP at BIA Advisory Services, who identified the path for expansion. “This will come from cross-platform growth and real energies put into finding local advertising revenue available through mobile and online advertising.”