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US media conglomerates feel the pinch of political ad comparisons during Q4

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US media conglomerates feel the pinch of political ad comparisons during Q4

Facing tough comparisons from the prior-year period buoyed by political dollars tied to the presidential election cycle, U.S. media conglomerates saw broadcast advertising revenue decline during the final reporting period of 2017.

The second year of NFL regular-season ratings decreases also impacted advertising results during the three months ended Dec. 31, 2017.

During the second quarter of its fiscal 2018, 21st Century Fox Inc., with its television and cable networks units reporting shortfalls, saw ad sales revenue drop 1.6% to almost $2.50 billion in the year-earlier period.

CFO John Nallen on the company's earnings call said the television segment, including FOX (US) and its owned stations, endured advertising declines, "reflecting challenging comparisons to the prior year, which included local political revenues from the general election and the highest viewership for a World Series in over two decades."

He also pointed to the effect of lower NFL ratings, although the pro football drop was more than offset by the addition of college football of Fox network. Domestic cable advertising declined 3%, owing largely to the impact of lower general-entertainment ratings from fewer hours of originals at FX Network (US).

CBS Corp.'s fourth-quarter advertising revenues decreased 2.8% to $1.75 billion from $1.80 billion in the prior-year period, which was boosted by record political advertising sales. To that end, local media segment revenue fell 14.4%, with TV stations missing the enhanced political ad dollars.

For the full year, advertising sales retreated 9%, as 2016 benefited from the network's telecast of Super Bowl 50 and the record political ad sales.

Looking ahead, CFO Joseph Ianniello on the company's earnings call said scatter pricing in daytime, prime-time and late-night was up nearly 40% from upfront levels, "demonstrating broad-based health in the marketplace." He anticipates that advertising will be one of the four drivers of incremental revenue in 2018, which he believes will benefit from a solid midterm election cycle in the back half of the year.

Revenue at Walt Disney Co.'s media networks in the first quarter of its fiscal 2018 was flat at $6.24 billion, with cable networks revenue ahead 1% to $4.49 billion, while broadcasting declined 3% to $1.75 billion.

Broadcast advertising revenues fell in the face of fewer impressions at ABC (US) and lower political advertising on the owned-television stations, partially offset by higher network rates. Disney CFO Christine McCarthy on the company’s earnings call said prime-time scatter pricing at ABC was running 30% above upfront levels.

Results also were impacted by an 11% advertising decline at ESPN Inc. Impressions and rates both decreased, impacted by the timing of the College Football Playoff semifinal ballgames, which moved to the second quarter. McCarthy said ESPN's ad revenue would have declined at a 7% rate, sans the shift.

During the current quarter, McCarthy said ESPN's cash ad sales pacing was comparable to last year, reflective of the timing benefit of the two semifinal contests airing on ESPN (US) which typically draw higher rates than other bowl games. She also noted that ESPN's ad sales have been negatively impacted by the Winter Olympics, which has increased the amount of sports inventory in the marketplace.

Fourth-quarter ad sales results were mixed at NBCUniversal Media LLC, Comcast Corp.'s programming arm. While the broadcast television segment registered a 4.1% increase in revenue, the gain emanated from a 44.7% jump in distribution and other revenue tied to higher retransmission-consent fees. Ad revenue, despite higher rates, was down 6.5%, with CFO Michael Cavanagh pointing to "ratings declines, including the NFL, and the absence of political advertising revenue at our local stations."

At the cable networks, advertising, which declined 4.7% over the full year to $3.40 billion, grew 2.3% to $878 million in the quarter, with higher rates overcoming audience erosion.

NBCU is sitting on what should be a major segment haul in the first quarter, as it recorded over $500 million in national ad sales for Super Bowl LII and more than $900 million from the Winter Olympics from Pyeongchang, South Korea.

Viacom Inc. began its fiscal 2018 with a 1% increase in worldwide advertising to $1.31 billion. International advertising revenues improved 22% to $371 million, but domestic ad sales, feeling the ratings pinch at certain networks, notably kids leader Nickelodeon/Nick At Nite (US), decreased 5%, even though the unit managed to secure higher pricing and digital advertising growth.

CFO Wade Davis on the company’s earnings call said Viacom expects sequential improvement, with domestic ad sales forecast to decline in the low to mid-single digit range during the March quarter. Continued amelioration is expected to yield positive growth in the fourth quarter, driven by ratings gains from new original programming, enhanced carriage from greater penetration on Altice USA Inc.'s Suddenlink systems and Charter Communications Inc., as well as accelerating contributions from digital and addressable initiatives.

Turner Broadcasting System Inc.'s networks recorded its only year-over-year improvement in ad revenue during the fourth quarter. Boosted largely by sales against TBS (US)'s coverage of MLB's postseason, Turner networks scored a 2.2% gain in advertising revenues to $1.21 billion from $1.19 billion. The uptick was partially countered by the comparison to the prior-year's political ad take.

Management in its fourth-quarter earnings release — parent Time Warner Inc. did not hold a call as it awaits the outcome of the U.S. Department of Justice's lawsuit that aims to block its purchase by AT&T Inc. — said scatter pricing for domestic networks was up in the high-single digits in the first quarter, compared with the rates secured during 2017's upfront selling season.

Time Warner anticipates Turner ad sales will improve in the high-single to low-double-digits in the first quarter, stemming from a 5-percentage-point benefit from the programmer airing the Final Four games from the "March Madness" men's college basketball tournament March 31.