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Question of the Day
LOS ANGELES (AP) - NBC’s windfall on the Olympics is turning into a downfall for other TV networks.
On Thursday, CBS Corp. Chief Executive Les Moonves became the third major media company executive in three days to acknowledge that the London Olympics were sucking the oxygen out of the advertising market.
Executives at CBS, Time Warner Inc. and Discovery Communications Inc. all said this week that the so-called “scatter” market for last-minute ad buys was experiencing softness. They said advertisers were spending more of their money on commercials for the Olympics, which have been more popular than forecast.
NBC owner Comcast Corp. said Wednesday that it now expects the Olympics to be break-even, or possibly profitable, because of bigger-than-expected audiences. Earlier, it thought the Games would lose $200 million.
Rivals expected the dollars to flow back to their networks after the Games are finished.
“In terms of any softness, I think it’s all attributable to the Olympics,” Moonves said during a conference call following the release of company’s second-quarter earnings results. “It’s something that is totally fine, totally business as usual.”
Moonves said the market will return to normal in September, when the fall TV season begins and CBS starts to benefit from higher commercial prices that it locked in during the bulk sales period known as the upfronts earlier this year. He also expects political ad sales to break records ahead of the presidential election in November.
“We’re ready for the gun to go off in the middle of September,” he said.
The CBS executive’s comments come a day after Time Warner Chief Financial Officer John Martin told analysts that demand for last-minute commercial buys on networks such as TNT and TBS was “a little slow right now, and that’s due to money being diverted to the Summer Olympics.”
Demand for ads is a concern because the market has been slowing down lately.
For the April-June period, CBS said its advertising revenue fell 3 percent, compared to a 5 percent gain in the January-March quarter. Ad revenue at Time Warner networks rose 2 percent in the quarter, compared to 6 percent in the previous quarter. Discovery’s U.S. ad revenue was up 7 percent, compared to a 13 percent gain a quarter earlier.
“I think the question is, `Is the ad market softening?” said Robin Dietrich, an analyst with Edward Jones. “The economic news as of late has not been all that favorable.”
Despite the lukewarm outlook, CBS reported that its net income rose 8 percent in the most recent quarter through June, beating analysts’ expectations, even though revenue fell, primarily because of timing issues.
CBS was unable to match last year’s second quarter revenue performance because in 2011 it received a large bump from a TV licensing deal with Netflix. Last year also saw the semifinals of the March Madness NCAA college basketball tournament occur during the April-June quarter.
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