Soft Q1 Advertising Sales for Media Conglomerates Put Networks in Tough Spot

The narrative is not pretty. Across the board at the major media conglomerates, advertising sales reported in first-quarter earnings were flat at best or down sharply from year-ago benchmarks.

Most of the majors are facing tough comparables from last year, when the presidential election cycle revved up demand and the scatter market was generally buoyant. Executives acknowledged that shaky demand in both domestic and international markets, coupled with the trend of declining live-TV ratings, made for an uphill climb.

The first-quarter results set the table for a tough round of upfront negotiations when TV ad sellers and buyers begin the annual haggle over $10 billion-plus in advance advertising commitments for the coming TV season. The first phase of that process, the network programming presentations, are underway this week in New York.

Anthony DiClemente, senior media analyst for Nomura Instinet, cited CBS, Scripps Networks Interactive and Discovery as bucking the downturn. He sees local ad demand as inevitably lower than in the politically charged 2016 presidential cycle. Auto sales are cooling off, which will trickle down to lower spending on local stations.

“What was new was the mixed commentary around the stability of the ad market — and this may be a result of posturing on the agency and media buyers side,” he said.

Indeed, some executives said there was a feeling of hesitancy on the part of blue-chip advertisers in vital TV categories such as automotive, tech and pharmaceuticals.

“Given some uncertainty in the economy, we think that advertisers are holding back a bit, and they’re taking a little bit of a wait-and-see approach,” said Turner CEO John Martin during Time Warner’s May 3 earnings call. Martin also cited a slowdown in the number of overall new product launches for the pullback in spending.

The paradox of the fast-changing television market is that advertisers are steadily paying higher prices even as ratings dwindle. But the first-quarter numbers demonstrate that higher pricing isn’t enough to offset the decline in ratings. Even such mighty players as Comcast-NBCUniversal and Disney were caught in these crosscurrents.

Mindful of the looming upfront negotiations and Wall Street chatter about a correction coming in the valuation of media stocks, CEOs emphasized burgeoning efforts to make fundamental changes in the way TV advertising is sold. Buyers and sellers are trying to come to terms on standards for sales based on highly targeted slices of audience (new parents, likely car buyers, first-time homeowners, etc.) rather than broad age- and gender-based demographics.

There’s also continued focus on the fact that TV’s traditional measurement systems and ad protocols haven’t kept pace with the growth of multiplatform viewing. That amounts to money left on the table when viewing is done outside the three-day measurement window — or C3 rating — that has been the norm for a decade.

CBS Corp. chairman-CEO Leslie Moonves said the Eye has gradually moved many advertisers to a seven-day window, or C7. CBS expects to make more progress on that front in this year’s upfront. Those extra days will bring extra viewers that will plump up ad revenues for hit shows like “The Big Bang Theory,” Moonves predicted.

“The [viewing] numbers between C3 and C7 are quite large, and they’re growing larger every day,” he said. “So the numbers that will come into the marketplace will be much higher, and this will be found money.”

Time Warner’s Turner has joined with Viacom and Fox to offer a consortium approach to setting uniform standards for audience-based guarantees across all of their respective networks. Turner’s Martin said his company’s goal is that no less than half of the ad buys across its portfolio — including TNT, TBS, CNN, Cartoon Network and Adult Swim — will be audience-based rather than demo-based by 2020.

“That’s a pretty aggressive goal and ambition,” he said.

More Biz

  • Phil McIntyre Steps Down as Roc

    Phil McIntyre Steps Down From Roc Nation Management, but Remains Affiliated With Company

    Phil McIntyre has stepped down as president of Roc Nation Management, but his PhilyMack management company remains affiliated with Roc, a source close to the situation tells Variety. PhilyMack, which McIntyre founded in 2006, partnered with Roc Nation in 2015. The source stressed that McIntyre’s role at Roc Nation Management  — whose clients include Rihanna, [...]

  • Harvey Weinstein Trial

    Ben Brafman Drops Out of Harvey Weinstein Rape Case

    Harvey Weinstein has officially parted ways with defense attorney Ben Brafman, releasing a joint statement Thursday announcing the move. Weinstein had clashed with his defense attorney over strategy in his rape and sexual assault case. The pair issued a statement saying their parting was amicable, and that Brafman would cooperate fully with Weinstein’s new attorneys. [...]

  • Netflix - Apple TV

    Netflix Turns in Record Q4 Subscriber Gains, Price Increase Weighs on U.S. Forecast

    Netflix is beating Wall Street expectations on international subscriber growth — but its recently announced price increase in the U.S. may have put a damper on its momentum in the States. For the fourth quarter of 2018, Netflix reported 1.53 million paid net adds in the U.S. and 7.31 million internationally, to end the year [...]

  • Heather Parry Live Nation

    Live Nation Investigation of Heather Parry Also Targets Leakers (EXCLUSIVE)

    Over the past two weeks, the law firm of Paul Hastings LLP has been probing allegations reported by Variety last month that Heather Parry, the head of Live Nation Productions, had verbally abused employees and used offensive language in the workplace. But the lead investigator, Elena Baca, seems to be just as interested in uncovering [...]

  • Leslie Moonves

    Leslie Moonves to Pursue Arbitration for His $120 Million Severance From CBS

    Former CBS Corp. chairman-CEO Leslie Moonves will pursue an arbitration claim to fight CBS for the $120 million severance that he was denied last month when the company’s board of directors determined he was fired for cause. Moonves was ousted in September after multiple women came forward with allegations of sexual misconduct against the longtime [...]

  • A view of the SK Telecom

    Korean OTT Players, SK Telecom Join Forces to Compete Against Netflix

    South Korea’s three major broadcasters KBS, MBC and SBS have joined forces with the country’s leading telecom firm, SK Telecom, to launch a new video streaming platform. The move is regarded as a defensive reaction against the growing influence of foreign competitors, lead by Netflix. The broadcasters already jointly own Pooq, with MBC and SBS [...]

  • David Lubliner Moves to UTA From

    Veteran WME Agent David Lubliner to Join UTA

    William Morris Endeavor agent David Lubliner is departing the company for a post at United Talent Agency, individuals familiar with the move told Variety. The parting of ways was amicable, the insiders added. Lubliner was a veteran in WME’s motion picture literary department. Rumors of his exit had been floating since Hollywood reopened for the new [...]

More From Our Brands

Access exclusive content