Filed under: Industry News, Entertainment Industry, Investing
The fall season has kicked off, so it’s time to look at the overall television market and the four companies that have the most at stake.
Racing to Cash In On the Back End
The month of May wasn’t that merry for many broadcasters as upfront ad sales didn’t go as well as expected. Think of the upfronts as a sales conference in which networks pitch 30-second spots to buyers, who commit money up front for the right to run their ads during commercial breaks. The more popular the show, the pricier the buy.
Most networks managed meager price hikes this time around, leading analysts to speculate that buyers are shifting dollars to on-demand platforms such as YouTube and Hulu.
“You’re definitely seeing more compelling growth in advertising spending on new media platforms, digital platforms, than you are on the traditional. I don’t think, though, that it’s matched dollar for dollar in the sense that I don’t think all the money that’s flowed away from broadcast in the upfront necessarily flowed directly into new digital platforms,” Disney (DIS) chief executive Bob Iger said during the most recent earnings conference call.
Twenty-First Century Fox (FOXA) President Chase Carey downplayed the digital networks in a call with analysts. He also said that Fox could see substantial upside in the “scatter” market, where unclaimed spots are sold. Highly rated shows can sometimes command a huge premium late in the season, as “Breaking Bad” did last year for AMC Networks (AMCX).
Networks Making Big Bets
Carey’s correct about the potential upside, but for broadcasters, the environment is also about as dangerous as it’s ever been. Here’s a closer look at the four networks with the most on the line.
1. CBS (CBS)
Is there a better positioned network than CBS? Not by my tally. “The Big Bang Theory” was TV’s highest-rated scripted show last season, with 19.9 million viewers. “NCIS” and “NCIS: Los Angeles” also broke into the top four. This season, CBS has five new shows. “NCIS: New Orleans” is the one to keep an eye on.
Starring Scott Bakula, Lucas Black, Zoe McLellan,and C.C.H. Pounder, this version of the “NCIS” team patrols Bourbon Street and beyond. If it hits, it’ll be another magnet for ad dollars, proof that CBS has a durable franchise it can continue to build upon.
Segment financials: CBS’ Entertainment segment includes both its signature TV network and film projects. Revenue jumped 12.4 percent last year. Operating income improved 15.4 percent. Playing home to three of television’s four highest-rated shows is having an impact, which means franchise exhaustion — if it sets in here — could take a toll.
2. Comcast (CMCSA)
After years of lagging behind, Comcast’s NBC subsidiary has enjoyed a resurgence. Dark drama deserves at least some of the credit. “The Blacklist” came from nowhere on Monday nights to attract close to 15 million viewers. This season, NBC is moving the show to Thursdays and funding six new programs. The unknown among the bunch is the drama “Constantine,” a DC Comics adaptation due next month that scored well on the San Diego Comic-Con buzz meter.
Segment financials: Despite strong ratings from its top programs, NBCUniversal’s broadcast TV operation earned $1 billion less revenue last year than the year prior. Operating income also declined slightly. If “Constantine” wins Friday-night viewers for the Peacock Network, creating another franchise, it could give a needed boost to the division’s financials.
3. Disney
Over at ABC, only “Dancing With the Stars” ranks among last season’s 10 most-watched network programs. “Agents of S.H.I.E.L.D.” didn’t even make the top 40 but is returning for a second season. Previews tease “Agent Carter,” a fill-in show that arrives during the winter break. Six other new shows are on tap, including another Shonda Rhimes legal thriller, “How to Get Away With Murder.”
Segment financials: Not surprisingly, ABC saw a modest revenue increase and a 15.7 percent drop in operating income. Stiff competition from network rivals has made it tough for the network to gain momentum outside of Thursday winners “Grey’s Anatomy” and “Scandal.” A new hit could produce meaningful upside for this segment of Disney’s business.
4. Fox
The fourth major network does well on cable with Fox News and related shows, but trails badly in terms of broadcast programming. Yet there is a silver lining: New shows with buzz, such as “Gotham” and “Gracepoint.” “Gotham” drew 8.2 million viewers in its debut Monday, but sophomore series “Sleepy Hollow” followed with only 5.5 million viewers, down an average of 8.4 million viewers last year. In 2014, Fox adds five new shows, with getting the most buzz.
Segment financials: After two years of mostly flat growth, Fox TV grew revenue 9 percent in fiscal 2014. Operating income grew 3 percent. Fox may not be the biggest network, but it does well cashing in on what it has. In that sense, “Gotham,” “Gracepoint” and its other new shows aren’t so much risks as they are potential catalysts.
Now it’s your turn to weigh in. Which networks are you watching most? Which shows do you think will have an impact? Leave your thoughts below.
Motley Fool contributor Tim Beyers owns shares of Walt Disney. Find him on Twitter as @milehighfool. The Motley Fool recommends AMC Networks and Walt Disney and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.
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Source: Investing
