Lowe Worldwide--billed as creative specialists, but a thorn in Interpublic's financial side for some time--looks to return to profitability in 2008. Just about a year ago, the agency lost its GMC business in the U.S., leading to layoffs and further economic hiccups. But Wednesday, IPG CEO Michael Roth said Lowe is "on target to post a profit for the full year, which is consistent with one of our primary objectives." Much of the agency's turnaround, he said, is due to success in the UK, where it recently won new business from Unilever. Roth spoke about the agency's prospects on a conference call to discuss second-quarter results, where IPG saw an 11.5% revenue gain to $1.84 billion and organic revenue up 6.3%. Its stock price rose 7% to $8.51 on the news. While Lowe was named as one reason for second-quarter success, so was media services, where a new Mediabrands unit has been formed. Roth cited an investment in luring top-notch talent as a priority in media, naming recent hires Matt Seiler from Omnicom and Michael Hudes from Clear Channel as examples. Still, amidst economic uncertainty, IPG said it has requested that its operating units carefully monitor personnel numbers and refrain from new hires unless revenue growth corresponds. But Roth reiterated--as he has consistently--that IPG has not been noticeably affected by the economy. He said clients are "clearly" evaluating their spending habits, but there has not been a major pullback on IPG's end. One example: 7% of total business is in the troubled financial sector, but the principal client there is MasterCard, and Roth said it has largely maintained its marketing investment level.
The recent lackluster results for Disney's free-TV operations that the company reported Wednesday were foreshadowed two months ago by company CEO Bob Iger. At an investor event, he offered a stark view of the future of the single-revenue-stream formula that is broadcast TV. "It's a tough model--it's really tough," he said, a notable admission by a top executive who presides over a business with billions at stake there. His comments in May referred both to the ABC network and its owned-and-operated stations. On Wednesday, Disney said broadcast revenues were flat in the recently completed quarter and operating income was down 11% (to $260 million)--and it gave no indication that a turnaround was imminent. Like Viacom on Tuesday, Disney said ad spending has been ebbing recently--not only at ABC and the stations, but also at ESPN. "The pace of advertising sales has slowed somewhat in recent weeks," CFO Tom Staggs said on a conference call about the results. Overall, even with broadcast revenues flat, Disney's larger media networks segment--which includes ESPN and the Disney Channel, and revenue streams such as affiliate fees--saw an 8% revenue jump to $4.1 billion for the three months ending in June. Operating income was up 9% to $1.4 billion. Disney at-large saw revenue up 2% to $9.2 billion and operating income increase at the same rate to $2.3 billion. Staggs said that in the recent quarter, broadcast performance was hurt in part by ad dollars falling at ABC's 10 stations by "mid-single-digit percentages." Struggles in the station business are hardly unique to ABC--where like its competitors, spending cuts in the auto category have been a trouble spot. Disney said cuts in spending in financial services and consumer electronics were also contributing factors. The hurdles raise the question of whether Disney would sell any of its stations. NBC Universal recently took the somewhat startling step of looking to unload two of its 10 stations, including one in Miami. While seven of ABC's stations are in large markets, it operates outlets in Fresno, Calif., Flint, Mich., and Toledo. Still, executives gave no indication that they intended to put stations on the market. Staggs said: "We're extremely pleased with our station management team's performance" in light of the economic circumstances. He said eight of the stations are No. 1 in their markets, and have gained market share even as ad dollars have dropped. Iger called ratings "sensational" on the Wednesday call. At the ABC network, Iger said choppy waters are necessitating cost-cutting, but indicated that investment may not ramp up when that smooths out. The cuts have not come in program development or production, he said--but there isn't "room in that business" to "significantly" increase them either. The recent writers' strike did bring some cost-cutting. Iger said ABC canceled some long-term commitments to writers and producers, and does not plan to make similar ones. Staggs said scatter pricing has remained above 2007-08 upfront levels at ABC--but added that this was a result of tight supply, an indicator that volume may not be up much. Iger was said to play a role in negotiating an end to the writers' strike, and said Wednesday that he did not expect the impasse with the Screen Actors Guild to lead to a work stoppage-because of the economy and the potential for a public opinion backlash. It's "unlikely you'll see another work stoppage in the near term," he said.
The biggest cable system operator, Comcast Corp., is making some gains against its telco competitors, which resulted in strong investor interest in the company on Wednesday. Its second-quarter earnings results lifted the cable system's share price by 5% in midday trading to just under $20 a share--all this despite missing out on financial analysts' earning estimates. Comcast's earnings were at $632 million or 21 cents a share, up from $588 million in the second quarter of 2007. Analysts were expecting 23 cents a share. Revenue climbed to $8.55 billion versus the $7.71 billion of a year ago. One major focus was Comcast's continued positive results in the industry's so-called triple play: video, broadband and phone service. One key area comes at the expense of the telcos: Comcast said 555,000 new digital-telephone subscribers signed up during the quarter, with revenue jumping 50% to $640 million. In addition, the company noted that high-speed Internet revenue rose 10% to $1.8 billion. Comcast added 278,000 new Internet customers in the quarter. The company said revenue from its cable business rose 7% to $8.1 billion, with video revenue increasing 3% to $4.7 billion. Investors seemed to shrug off news from Comcast's digital cable subscribers. Comcast added 320,000 customers in the second quarter, far below the 823,000 it added in the second quarter of 2007. Digital now accounts for 67% of customers, or 16.3 million subscribers. Average revenue per cable subscriber rose 9% to $110 in the second quarter. Comcast's strong investor interest was also the result of lower-than-expected video subscriber growth from competitors' new video services provided by Verizon Communications and AT&T. The company's cable networks--which include Versus, E!, Style, Golf Channel, G4 and AZN Television--saw revenue rise 10% to $366 million. At the company's local cable systems, advertising revenue slipped 2% to $399 million in the second quarter. Comcast will soon kick off a major marketing campaign timed to the changeover from analog to digital signals next February. The switch is estimated to give the company an additional 1 million to 2 million new customers.
Meredith Corp.'s fourth-quarter 2008 financial results hit investors hard. Earnings were more than cut in half from its fiscal 2007 results. Meredith posted $19 million in earnings, down from $52 million in the quarter before. Revenues were also down $385 million from $428 million. All that sent investors scrambling, pushing down the company's stock by more than 8% in midday trading to $25.55. The company said that after a strong performance in the first half of fiscal 2008, the economic slowdown was tough--producing lower advertising demand from a soft retail marketplace, which resulted in weaker sales. For its publishing group, the company experienced higher costs, particularly paper costs. The fourth-quarter operating profit for publishing was $26 million versus $70 million in the comparable period in 2007. Total revenues were $306 million and advertising revenues were $153 million, compared to $345 million and $178 million, respectively, in fiscal 2007. Advertising pages--especially from food, prescription and non-prescription drugs and home marketers--declined more than 20%, accounting for about 75% of total fourth-quarter advertising page declines. Circulation revenues declined at Parents, Family Circle and Fitness magazines. The Meredith Corp. broadcasting group's operating profit was $19 million compared to 2007's $28 million. Revenues were $79 million, compared to $84 million in fiscal 2007. During the last six months, Meredith TV stations witnessed a decline in automotive advertising, as well as retail and movies, leading to a decline in non-political advertising revenues. In the first six months, non-political advertising revenues rose 4%, from online advertising and professional services and telecommunications ad categories. Retransmission agreements for Meredith television stations increased fees 50% over the prior year. As with other media companies, Meredith says broadcasting online and video-related revenues showed strong gains--climbing 80% in fiscal 2008. Average unique visitors increased more than 300%. More than 1.3 million videos were streamed each month during the year. "The Better Show," a Web-based TV show riffing off its Better Homes & Gardens brand, will be carried in more than 35 markets beginning this fall. In addition, Comcast video-on-demand customers downloaded more than 600,000 Parents TV videos in fiscal 2008.
Time Inc.'s struggling business titles got another shake-up Wednesday with two announcements: Fortune Small Business is losing most of its staff and moving to its custom-publishing division, and Money is getting a new publisher. The moves are symptomatic of the major downturn affecting business titles, and indeed, consumer mags in general. Fortune Small Business--which is distributed free to about 1 million small business owners with American Express cards--will leave Time Inc.'s Fortune|Money Group and join Content Solutions, the company's Custom Publishing arm. As part of the transition, 14 of 17 staffers are losing their jobs, to be replaced by freelancers and the custom-publishing staff, who also produce Merrill Lynch Rewards. Managing Editor Dan Goodgame is out, with subordinate Brian Dumaine stepping into his role. Time Inc. said that the magazine will not become a typical custom publication; editorial will continue to be independent of ad sales. If this is true, the move is simply a cost-cutting measure by a magazine publisher stretching to make ends meet in an adverse marketplace. Ad pages at Fortune Small Business are down 2.7% through August to 271.5, according to MIN Online, following a 13.8% drop in 2007 compared to 2006--to 477, per PIB. None of the titles at American Express Publishing that draw on Time Inc.'s editorial expertise are affected. Amex and Time Inc. share the profits from these titles, including Travel + Leisure and Food & Wine. Also on Wednesday, John Donnelly was named publisher of Money magazine, replacing Brett Wilson, who left the company to become senior vice president of ad sales at USA Today. Donnelly was previously the associate publisher for the Fortune|Money Group. Wilson left his post in June after just 10 months on the job--possibly because of pressure from higher-ups who expect publishers to staunch the losses at the struggling group. At Money, a monthly, ad pages are down 1.75% through August to 465, following a decline of 16.7% in 2007 to 801 pages. At biweekly Fortune, ad pages are up slightly to 2.88 through August, following a 17.3% drop in 2007 to 2,376. Last year, Vivek Shah, the new head of the Fortune|Money Group, closed Business 2.0 after a year of declining ad pages. It may not be much comfort to FSB staffers, but other business magazines are in the same boat. According to MIN Online, BusinessWeek's ad pages are down 16% through July 21st, Entrepreneur is down 2.35%, Forbes is down 18.5%, Kiplinger's Personal Finance is down 13.4%, and Smart Money is down 26.1%. In all cases, these drops come on the heels of declines in 2007, except Smart Money, which was flat last year. On the bright side, so far in 2008, Fast Company is up 31.3%, Inc. is basically flat, and the Economist is up 5%.
Knowledge Networks, a Silicon Valley-based company that conducts consumer research in multiple fields, will serve as a quasi-Nielsen for NBC Universal during the Olympics. KN will provide overnight data regarding time spent consuming Olympic content across NBCU outlets, but also in newspapers and radio where the company doesn't have a presence. KN's overnights will cover TV, Internet, mobile, newspapers, magazines and radio, where its data will be derived from some 500 interviews a day with members of a nationwide panel. More than a dozen NBCU properties--across TV, the Internet and mobile--will be part of the research. KN said the research will give NBCU insight on a daily basis that could allow it to adjust its coverage focus. Perhaps more likely, the research could be used to help sell ads for the next two Olympics on NBC, Vancouver in 2010 and London in 2012. KN said NBCU "will better understand when and where consumers are interacting with the Olympics across many platforms, providing daily tactical guidance as well as strategic insights for serving advertiser partners in future Games." It's unclear what conclusions NBCU may draw from KN's research about Olympic content consumption in magazines or on radio, although it's likely to be used to some degree to try and demonstrate that the Olympics remain a consumer draw. As far as its own properties, the research is another step as NBCU aims to put together a total reach figure for its Olympics coverage across its platforms. KN could offer a nightly report on unduplicated audiences for specific Olympic events. NBCU's research president Alan Wurtzel said the company is "seek(ing) out new ways to understand and define the value that NBC's multi-platform Olympics coverage delivers to advertisers." NBCU will be offering a slew of events live on the Internet from Beijing starting Aug. 8. At the 2006 Torino Games, it had one--the hockey gold medal game. KN's research could offer some insight into how many people are watching the Games in bars, hotel rooms and in other places where Nielsen does not track TV viewing. KN said NBCU "will also gain insights about respondents' (to its daily survey) demographic and product purchase and use characteristics." KN has conducted Olympic research for NBC since the 1988 Seoul Games.
In line with the rest of the radio industry, Cox Radio posted weak results for the second quarter on Wednesday, with total revenues sliding 8.3% to $108 million, as station operating income tumbled 13.6% to $41.3 million. The troubled economy is blamed for the overall declines. The turmoil produced a 6.1% drop in local revenues and a 17.5% drop in national revenues. Other revenues (classified by the Radio Advertising Bureau as "non-spot") fell 4%. The company also suffered a $109.1 million operating loss in the second quarter, in large part because of a $147.6 million non-cash impairment charge resulting from a decrease in the value of intangible assets. Bob Neil, president and CEO of Cox Radio, said that "given the current environment, we are focused on more aggressively controlling our costs, but continue to make strategic investments in programming and marketing where appropriate." But he quickly added that in comparison with other traditional media such as newspapers, the company is "doing pretty well in a difficult environment." He evinced hope that the radio industry will pull out of the current revenue slump and return to positive growth sometime in the next year.
Network summer ratings are down 3% this season so far, but two of the summers' biggest shows--NBC's "America's Got Talent" and ABC rookie "Wipeout"--continue to gain or maintain strength on Tuesday night. ABC's "Wipeout" started the ball rolling with a big-time Nielsen Media Research preliminary 3.5 rating/11 share among adult 18-49 viewers at 8 p.m. Although "Wipeout" is down a bit, it kept itself well ahead of other shows--now a rating point and a half more than its nearest competitor, NBC's "Celebrity Family Feud," which earned a 2.0/6 in 18-49 viewers. At 9 p.m., the other big reality show of the summer, NBC's "America's Got Talent," took over with a 3.6/10--not only the biggest-rated show of the night but the show's best numbers of the summer so far. (Last week it earned a 3.4/10.) It put a major crimp into other 9 p.m. shows--ABC's "I Survived a Japanese Game Show," which took in a 2.3/6, and CBS' "Big Brother," which earned a 2.2/6. Things settled down at 10 p.m., with shows getting more normal two- plus ratings, led by the ABC special "Primetime," which took in a 2.4/7. Encore performances of two crime shows, NBC's "Law & Order: SVU" and CBS' "Without a Trace," were next with a 2.0/6 and a 1.2/4, respectively. Fox played in the background most of the night with repeats of "Kitchen Nightmares" reaching a 1.5/5 in 18-49 viewers nd "House" earning a 1.7/5. ABC and NBC took most of the viewers this night, with ABC earning a 2.7/8 and NBC a 2.5/7. CBS, Fox and Univision were almost a rating point back, each with a 1.6/5. CW finished with a 0.4/1.