Analysts: Weaker TV Ratings to Remain Entertainment Investor Concern
Sluggish TV advertising trends outside the Summer Olympics and mostly lower film results were two key trends of the latest quarterly earnings season for Hollywood conglomerates.
But the dominant theme was the weak ratings start to the fall TV season for broadcast networks except for NBC. "During third calendar quarter earnings reports, the main conversation focused on the significant decline in broadcast TV ratings," said Sanford C. Bernstein analyst Todd Juenger.
And the decline has led to industry calls for improved measurement of DVR and online viewing of TV shows.
Following earnings season, which came to an end late last week, Wall Street analysts said in many cases, better-than-expected digital licensing revenue from Netflix & Co. and retransmission revenue made up for any ratings-driven problems.
But while broadcast ratings weakness hasn't hit earnings, and trends may still improve for some, analysts say that the ratings trends will remain a key concern for investors.
Few immediately changed their recommendations on sector stocks despite some reductions to earnings forecasts. But most said they would keep a close eye on future trends and their financial impact.
"People are watching more programming than ever, but they are increasingly time shifting that content through the DVR, streaming and video on demand," said CBS Corp. CEO Leslie Moonves on his company's earnings conference call about the weaker ratings. "Nielsen is doing a good job of finding ways to measure this viewing, but not all of it is captured yet."
Walt Disney CEO Bob Iger mentioned a lack of new hit shows and echoed the key role of "the greater penetration of DVRs and the greater usage of DVRs."
Moonves even vowed that advertisers would end up paying for online and delayed viewing over time.
"Several years ago, we told you that we would monetize [retransmission] and [reverse compensation] in ways that would change our industry," he said. "There were many skeptics. Clearly, we have delivered on that commitment. You should now have full confidence that monetizing all of our viewing is a priority for us and will be a whole new part of our overall growth strategy in the quarters to come."
Several Wall Street observers said they are sceptical about some of the entertainment giants' explanations and promises though.
Juenger expressed his doubts in a report entitled "Math the Broadcast Networks Do to Make Themselves Feel Better."