A rosy outlook for TV ad spending, the latest in vertical integration, and the cable industry’s embrace of the Internet were among highlights of last week’s annual PaineWebber media conference (Dec. 4-8), which caps a tumultuous year of mergers, acquisitions and corporate beheadings.
Continuing a rebound from the early ’90s recession, a leading prognosticator said he predicts double-digit growth in TV advertising next year.
The four major TV networks should realize a 12.5% boost in ad revenues, to $13.1 billion, on top of a 6% hike for 1995, said Bob Coen, senior VP-director of forecasting at McCann-Erickson, whose predictions are considered the ad industry’s bellwether.
About $1 billion of the 1996 network total will come from the combined effects of a presidential election and NBC’s summer Olympics coverage, Coen added. But those two factors will also drive up demand (and therefore prices), providing an additional multiplier effect.
The McCann-Erickson forecast was joined by less-rosy projections from Zenith Media, which predicted 6.1% growth in North American advertising next year in current dollars, and – for network TV – by David Poltrack, CBS’ exec VP of research and planning.
In other PaineWebber presentations, Viacom chairman Sumner Redstone lauded the role of content over distribution, while the company’s president and CEO Frank Biondi hinted the next piece of content in Viacom’s sights is likely to be the record business.
Merger mania is being driven by a desire to lock up distribution, Redstone said, but “people don’t watch technology. Content is king and it always will be,” he said, echoing an oft-repeated phrase last week.
As an example, the Viacom team pointed to the success of “Frasier,” a Paramount sitcom which airs on NBC.
“The fact that ‘Frasier’ did not premiere on a Viacom distribution (outlet) won’t stop it from getting hundreds of millions in revenue for us,” Redstone said. Biondi added that “Frasier’s” average cash license fee per-episode will be about $2 million, and the company expects another $1 million in barter, making it a member of the $3 million per-episode club.
Biondi also anticipates reducing the company’s debt to $5.5 billion after several transactions are wrapped up, including the sale of its cablesystems to Tele-Communications Inc. and the sale of Viacom’s 77% stake in Spelling Entertainment, probably early next year.
Several cable industry execs were bullish on the Internet, saying that prospects for providing cable access, including entertainment services, are bigger than offering telephony.
“This is huge,” said Tele-Communications Inc. senior VP-finance Bernard Schotters, predicting that TCI’s “At Home” cable Internet service, to be rolled out to homes in the third quarter of ’96, would be profitable “almost from the get-go.” Schotters said an “explosion of content providers” would follow the cabler’s entry into the Internet, and programming services thwarted by cable systems because of channel capacity limits may switch to offering their programming on the Internet.
But Schotters noted that the big question is whether people will watch entertainment on computers rather than TVs. In other PaineWebber conference activity:
* News Corp. proselytized over the virtues of vertical integration, detailing how its global expansion in satellite and broadcast television allows it to dramatically leverage hefty investments in sports and entertainment programming. The firm, for instance, has earned $400 million in operating profit to date on Fox’s “The Simpsons,” both domestically through broadcast and syndication, and through overseas distribution.
Asked whether chairman Rupert Murdoch’s management style might be scaring away managers, limiting News Corp.’s success in the movie business, the company’s VP-finance and banking Bill Sorenson expressed support for the current team of Peter Chernin and Bill Mechanic. “I just think Rupert’s a demanding boss, like everybody else,” he said.
* Time Inc. president-CEO Don Logan said the magazine publishing unit of Time Warner hopes to cozy up to CNN still further if and when the acquisition of Turner Broadcasting is completed. Although both already have a relationship, “There are chances to work together in a much closer way to create and develop programming,'” Logan said, adding the two also plan to discuss packaging ad buys between CNN and Time both internationally and in the U.S. “We see this as a real revenue opportunity.”
* Gannett Co., just days after completing its $1.7 billion buyout of Multimedia, said it is in early talks with cablers about joint ventures with Multimedia’s cablesystems and entertainment division. But the company ruled out the sale of either.
* Gaylord Communications signaled its intention to sell or swap its two remaining TV stations, in Dallas and Seattle, which chief financial officer Terry London termed non-strategic assets.
* Comcast Corp. prexy Brian Roberts said he’s considering a major investment in Comcast-owned QVC to take the homeshopping channel “to the next level,” as former QVC chief Barry Diller now tries to boost the lagging Home Shopping Network.
Joe Flint and Martin Peers Contributed To This Report.