Drawn and Quartered: Ongoing Ratings Slide Will Take a Bite Out of Cable Earnings

Analyst Eyes a 3% Drop in Ad Revenue for the Second Quarter

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The C3 ratings for the second quarter are in and it would appear that there is no end in sight for cable's ongoing demo drought.

According to Nielsen data on TV-land currency -- three-day commercial ratings among 18-to-49-year-olds -- ad-supported cable networks saw their prime-time deliveries drop 9% in the second quarter.

Wall Street-watchers say the decline will have an impact on big media's upcoming earnings calls. In a note to investors, MoffettNathanson analyst Michael Nathanson said he expects cable ad sales revenue will have fallen 3% in the quarter to $9.21 billion, with Viacom (-8%) and NBC Universal (-8%) likely to take the biggest hits.

When weighted against the actual target demos at each of its networks, Viacom's second-quarter total-day C3 ratings were down 20% versus the year-ago period. Ratings at the top networks were down significantly, as Nickelodeon's deliveries of kids 2 to 11 plummeted 30%, Comedy Central's share of adults 18 to 49 fell 23% and MTV's performance in the 12-to-34 demo was off 22%.

While none of the eight cable network groups covered by Mr. Nathanson posted year-over-year ratings gains, those who weathered the least C3 erosion in their relevant demos were Scripps Networks (-1%), Discovery Communications (-2%), AMC (-2%) and 21st Century Fox (-3%). The Turner nets were down 8%, as fewer NBA playoff games on TNT offset gains at CNN (+24%) and Cartoon Network (+11%). Disney's cable holdings fell 12%, as tough Men's World Cup comps drove ESPN's ratings down 16%.

Turner is expected to report higher second-quarter ad sales revenue than any other network conglomerate, with MoffettNathanson forecasting a $1.13 billion haul, while Disney is on track to generate $1.03 billion in sales. With an estimated $1.02 billion in second-quarter sales, Viacom is the third member of the billion-dollar club.

On the broadcast side of the ledger, the Big Four networks were down 4% in aggregate 18-to-49 C3 ratings, as an outperforming ABC (+10%) counterbalanced declines at CBS (-7%), NBC (-14%) and Fox (-17%). ABC benefitted from a stellar NBA Finals matchup between LeBron James' Cleveland Cavaliers and Steph Curry's Golden State Warriors; ratings for the six-game series were up 30% versus the 2014 Heat-Spurs showdown.

MoffetNathanson forecasts second-quarter network ad revenue to fall 2% to $3.42 billion, with NBC and its local TV stations expected to lead the way with a $1.22 billion haul, down 2% versus the year-ago $1.25 billion. The firm sees CBS collecting $888 million in ad sales for the quarter, down 3%, while ABC is on target to bring in $875 million, an improvement of 2%. With seven fewer weekly prime-time hours to sell than its competitors and no episodes of "Empire" on its schedule in Q2 (the two-hour season finale aired on March 18), Fox is expected to drop 10% to $435 million.

All told, broadcast and cable C3 ratings for adults 18 to 49 were down 8% in the second quarter. Excluding Olympic quarters, the last time prime-time TV ratings were up organically was during the third quarter of 2011.

Of course, it's worth noting that a good deal of the networks' actual deliveries remains unaccounted for. "These are measured linear ratings by Nielsen and don't account for the shift away from traditional viewing habits that are making these metrics less reliable," Mr. Nathanson wrote.

NBC Universal will get earnings season underway when parent company Comcast reports its second-quarter numbers on Thursday, July 23.

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