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Ad recovery boosts revenue for broadcast, cable
NEW YORK (AP) - Americans may be fond of the Web, but they are still in love with their TV sets _ and so are the advertisers who want to reach them.
Big media companies are riding a rebound in TV ad spending. This week, Viacom Inc. and Time Warner Inc. both reported that their cable TV channels saw improvements in advertising revenue. CBS Corp. saw a similar rebound at its local television stations. News Corp. saw growth on both sides.
The companies’ results this week offer one encouraging data point for economic prognosticators. It means businesses have the money to spend on commercial time again. And they are more confident that consumers will have the money to respond to their ads at shopping malls and car dealerships.
Media executives say the rebound can keep rolling into 2011.
That’s in part because prices for a large chunk of commercial time this year had already been locked in more than a year ago during the so-called “upfront” period, when advertisers bid on commercial time for the upcoming television season. Rates were down sharply then because of the recession.
After September, higher rates from this year’s upfronts should kick in and be reflected in company results.
Still, ad spending is sensitive to the broader economy, which has been flashing mixed signals.
“We’ve seen a wave of spending come back into the marketplace,” said Steve Farella, CEO of the independent media agency TargetCast tcm. But he added, “there’s a lot of money and a lot of clients who are still cautiously optimistic about 2010. I’m not sure this recovery is on a solid footing yet.”
For Viacom, which is controlled by 87-year-old billionaire Sumner Redstone, the increase in spending has led to a full year of rising profits. The company said second-quarter net income increased 52 percent to $420 million, or 69 cents per share, from $277 million, or 46 cents per share, a year ago.
The results out Thursday were tempered by weak DVD sales and weren’t enough to lift the company’s stock. Viacom shares slipped 32 cents, or nearly 1 percent, to close Thursday at $33.70.
Overall revenue was flat at $3.3 billion, slightly bellow the average forecast from analysts of $3.4 billion. The revenue shortfall came mainly from a 10 percent drop in film revenue, led by a 43 percent drop in home entertainment. DVD sales are suffering from still-sluggish consumer spending and the growing availability of television and movies on the Web.
Still, revenue climbed 6 percent to $2.09 billion at Viacom’s cable channels, which include BET, MTV, Comedy Central and Nickelodeon. Operating income at the cable unit, which also includes the subscription HBO channels, climbed 14 percent to $789 million.
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