Olympics Leave No Gold in Q3 Advertising Forecast

Media companies expecting a rebound in fourth quarter

Media companies discussing their
second-quarter earnings have been making it pretty clear that the third quarter
will be a rough one as far as advertising sales growth.

Most are blaming their tough sledding on the Olympics sucking up demand for ad
dollars even as it draws record-setting audiences, rather than overall demand.
Nevertheless, some analysts remain concerned that a sluggish economy and a
crisis-prone worldwide banking system might have a negative impact on the
scatter market.

On a more hopeful note, media company executives are saying they expect things
to be better beginning in the fourth quarter, when higher prices from a decent
upfront market start to kick in.

Earnings season for the programmers kicked off with Crown Media, which has been
on a streak of double-digit quarterly advertising revenue increases. But during
Crown's secondquarter call with analysts, CEO Bill Abbott said, "There's no
question that third quarter is softer than we would like." Abbott, a former ad
sales executive, cited the Olympics, the economy and even the elections as
possible reasons why Crown was having third-quarter sales issues.

Discovery Communications noted its own third-quarter challenges in maintaining
strong ad sales growth. But CEO David Zaslav insisted that "we're not seeing
any softness in the market. The market remains strong." Instead, Discovery
pinned low third-quarter expectations on softness at some of its larger
networks caused by a programming cycle that's left the channel with limited
premiere hours. The Olympics were also cited as a factor, although it was hard
to quantify its effect.

In a report, analyst Michael Nathanson of Nomura Securities wrote that
Discovery's U.S. ad growth is expected to be in the "mid-single-digit range due
to both negative Olympic scatter impact and softer initial Q3 ratings. Note
that economic weakness was not cited as a swing factor- we remain worried
though." In a similar vein, John Janedis of UBS headed a section of his report
"3Q Cable Ad Guidance Disappointing- Is It the Olympics Or the Market?"

Discovery said ad sales will rebound in the fourth quarter, though it declined
to attach a number to that. "We had a very good upfront," Zaslav said, with
mid-to-high-single digit price increases and the highest dollar volume in
company history. New programming will be coming on line in the fall, he added. "So
we feel very good about fourth quarter and I think you can expect to see some
strong numbers on the advertising side, assuming that the market stays as is,"
Zaslav said.

Time Warner asserted that demand in the Q3 scatter market was a little slow due
to money being diverted to the Games. CFO John Martin said on Time Warner's
earnings call that with this result-and some other unique factors-the company
was not expecting to report positive growth in ad revenue in the quarter.

In addition to soft scatter, Time Warner's third quarter will be impacted by
international units in India and Turkey that have been shut down and will no
longer be generating revenue.

Following the Time Warner call, analyst Anthony DiClemente of Barclays Capital
said he revised his forecast for Time Warner and now expects advertising
revenue to be down 2% in the third quarter. He had previously predicted a 6%

Martin said Time Warner had several reasons to expect that fourth quarter ad
revenue would rebound, starting with Major League Baseball playoff games on
Turner Broadcasting.

"We also expect growth to be stronger in the fourth quarter, as we'll benefit
from additional NBA games on TNT, the 2012 presidential election, expectations
of improved overall ratings at our other networks in general, some easier
comparisons and the expectation of a much stronger scatter market once the
Olympics are over," Martin said.

Barclays Capital's DiClemente said he is expecting Turner to post a healthy 8%
increase in ad revenue in the fourth quarter.