Second-quarter earnings reports from Viacom, CBS and Walt Disney Co. showed tiny growth in national ad sales and losses in many local sectors. CBS's president-CEO, Les Moonves, even began his company's call with investors by admitting, "We're clearly challenged by the economic conditions affecting many industries, particularly as it pertains to our local businesses."
CBS revenue barely budges
CBS, for example, saw a 1% increase to $3.9 billion in total revenue over second-quarter 2007, with TV revenue up 2% to $2.2 billion despite a 2.9% decrease in CBS network ad sales. CBS's radio division, in the midst of a digital overhaul by merging with AOL's radio player, saw a 9% decline in revenue on a same-station basis. CBS Outdoor, meanwhile, increased by 8% to $598 million.
With local media currently its weakest sector, CBS is banking on digital to drive growth, as shown by its acquisition of CNET in May. Mr. Moonves reiterated the company's stated goal to reach $1 billion in interactive revenue within the next three years, based on this year's mid-$600 million figure. That's why CBS's interactive division will become its own separate segment beginning in the third quarter. "When we do, you'll see just how big a part CNET's many global destinations and users play in our newly expanded interactive business and how central it is to achieving our growth goals," Mr. Moonves said.
Walt Disney Co. saw a similar digital boost in broadcasting revenue, which increased $7 million on the strength of new internet dollars. CEO Bob Iger cited last year's acquisition of Club Penguin and increased sales for ABC's digital media.
But there's less at stake in the ad market, since Disney only receives one-fifth of its revenue from advertising, as Mr. Iger pointed out during a question about the recession's effects on Disney's ad business. "We have detected a weakness at the [ABC] stations and ESPN, particularly with autos, financials and consumer electronics. Advertising is only 20% of our revenue, so we're not as exposed to the ad climate as our media peers. We have almost no ad exposure outside the U.S."
Change at MTV
And while Disney has yet to see any political ad money at the local-station level, other companies are starting to pocket dollars from the November elections at a national level. Viacom, which saw a meager 1% increase in ad sales in the second quarter, recently relaxed the policy on accepting political ads at its flagship cable brand MTV. Said Viacom CEO Philippe Dauman, "It's not a huge opportunity for us, since most political ad buying is on local media. But it is an opportunity which we're taking advantage of. And particularly for a demographic that's very interested in this year's presidential election."
Yet Viacom is already looking to other categories to pick up the slack in the third-quarter "scatter" market, or when marketers buy ads on an as-need basis, which is showing early softness. "We're taking different steps to address it by introducing new advertisers to replace the ones who dropped off over the last couple months," Mr. Dauman said. "Again, given the state of the economy, it's just very hard to predict. But we are aggressively out there, trying to make the best of the ad dollars that are available for us."