Some traditional cable TV program ratings may be affected by Netflix, Amazon and other services that offer up rerun programming, per a media analyst. A number of major cable programming groups have seen viewership declines, most recently in the second quarter of 2012. Anthony DiClemente, media analyst of Barclays Capital, believes more competition could be the reason. “We believe most of the ratings weakness is concentrated in syndicated and rerun programming, a genre that now has more direct competition from online platforms like Netflix, iTunes, and Amazon,” writes DiClemente. “As such, we believe live sports and originals are increasingly important to the economics of both cable and broadcast programmers. Despite the anemic industry trends, Discovery continues to operate on a different tier, and has thus far, posted ratings growth of 16% in the 2Q.” DiClemente notes that second-quarter to-date ratings are a bit better than first-quarter numbers -- but still nothing to write home about. He says through May 27, five of the eight major cable programmers were flat or down in the quarterly ratings -- AMC Networks was off 13% year-to-year; Viacom networks down 10%; NBCU channels losing 10%; Time Warner networks off 5%; and Disney channels were flat. Media analysts have theorized that a sudden viewership decline in some kids' networks -- in particular Nickelodeon -- was due to more programming being made available on subscription video-on-demand services like Netflix.
One Wall Street analyst sees CBS becoming less dependent on advertising sales in five years -- with TV advertising representing less than 50% of its revenues from all its TV businesses. Brian Wieser, senior research analyst of the Pivotal Research Group, says CBS’ revenue from retrans fees -- as well as domestic, international and digital sales and cable networks -- will grow to $5.9 billion by 2017. That's more than all CBS’ TV advertising revenue, which is the majority of the company’s advertising revenue -- other areas being outdoor and radio. In five years, these non-advertising revenue businesses will exceed total TV advertising revenues, which Wieser estimates will be $5.6 billion --- $4.1 billion coming from CBS network TV ad sales and $1.5 billion from its local TV stations. By way of comparison, CBS network TV ad sales in 2012 are estimated to be $3.7 billion, while local TV advertising revenues are projected to reach $1.3 billion, for a total of $5 million. Total non-advertising revenues currently stand at $3.1 billion (in 2011). Revenues from retrans fees will be $250 million for 2012. Analysts have long worried over CBS’ exposure to sudden swings in the advertising market, where advertising revenues have represented up to 75% of the company’s overall revenues. That equation subjects the company to possible financial malaise, versus other big media companies that have more diversified media businesses. “CBS is the media stock best positioned to capitalize on what we believe are perpetually favorable trends benefiting the network TV business and its ancillary activities,” writes Wieser. Still, Wieser believes in future that CBS will reap rewards from its TV ad-related businesses: “Advertisers buy TV in general and broadcast networks in particular. Doing so is better and will remain better than all other alternatives for the foreseeable future.”
The American Association of Advertising Agencies (4As) has issued an advisory bulletin to members with some tips for dealing with the chaos that lies ahead on the airwaves, due to the expected tsunami of political ads as the election nears. Two years ago during the fall election season, political ads accounted for up to 70% of the prime-time inventory of some TV stations. This year, with so-called “SuperPACs” raising unregulated amounts of political donations -- and with both presidential candidates foregoing federal funds for campaigning (and thus avoiding caps on their spending) -- estimates are there will be a record $9 billion in political ad spending. Thus, the clutter of political ads on the airwaves is only expected to get worse, making it more of a challenge than usual for brand advertisers to get their own messages on the tube during election season. High on the list of suggestions from the 4As: Advise clients to avoid news time periods to the extent possible. “While all dayparts will likely see political/issue advertising, it’s best for an advertiser to spread the wealth to lessen the impact of pre-emptions on any one daypart, especially news areas." Agencies should also advise clients to be more flexible in terms of spot placements, the trade association adds. Indeed, clients may not have a choice, given the fact that stations are required by law to give politicians priority during certain windows leading up to elections. Stations can pre-empt the ads of any traditional clients to make room for the politicians. Because they’re so prolific, it’s likely that consumer packaged goods ads will be especially vulnerable to preemption, while “time-sensitive accounts will need to pay a lot more to stay in the market. "Think ahead to allow greater flexibility with substitutions, upgrades and make goods,” the 4As states in its advisory. “A tiered list of options approved by a client upfront is a good start to allow a buyer space to navigate the marketplace.”
If NBC Universal is poised to acquire Microsoft's stake in MSNBC.com, as Adweek recently reported, it must have forgotten to tell their sales organization. The MSNBC Digital Network just announced a reorganization that will split oversight of its sales efforts in New York City and Redmond, Wash. David DeRobbio has been named general manager of national sales, based in New York, while Paul Major has joined the company as the general manager of advertising product strategy, based in Redmond. Major previously led the product management group at Microsoft and MSN, and most recently oversaw Microsoft’s central marketing group and managed its global media operations. DeRobbio was previously the senior director of East Coast sales at MSNBC Digital Network, according to the announcement,. He will continue to work with both the NBC News and Microsoft sales teams to "deliver innovative marketing solutions and media programs."
Interpublic Group media agency Initiative has hired Scott Marsden as senior vice president, director digital. He will be responsible for leading the agency’s East Coast digital practice. As part of that remit, he will oversee digital accounts for clients, including USAA, Hasbro and the recently added MillerCoors. Marsden’s hire follows a recent reorganization by the agency that separated the shop’s digital and Innovations units. Dave Rosner had overseen Innovations and East Coast digital operations. But the shop decided that with both areas experiencing growth, it needed separate managers to run the units. As a result, Rosner returned full-time to running the Innovations operation, while Marsden succeeds him as head of the East Coast digital unit. Marsden joins Initiative from e-commerce company True Action Network, a unit of eBay, where he was vice president and marketing director with oversight of the e-commerce and digital marketing efforts for Toys R Us. Previously, Marsden was group director, strategy at Omnicom’s OMD, where he worked on client accounts such Visa and Bank of America. Earlier, he was a media director at WPP’s Ogilvy & Mather. The hire reunites Marsen with Nick Pahade, president and CEO for Initiative North America. The two worked together at True Action, where Pahade served as president. Pahade described Marsden as an executive “who will bring innovative ideas, direction and results to our clients.” Marsden will be based at Initiative’s New York offices and will report to Michael Hayes, president Digital Communications Worldwide.
Another online music platform is coming to Microsoft’s Xbox 360 game console, with Monday’s announcement that Slacker’s personal radio service will be available to Xbox Live Gold subscribers later this year. At the same time, Microsoft announced its own music service for the Xbox 360, Xbox Music, which will give users access to over 30 million tracks on the network, as well as via Windows tablets and phones. The Slacker Radio app will be available for free from the Xbox Live Marketplace for Gold subscribers, giving them access to Slacker’s portfolio of over 200 curated and hosted stations, including ESPN Radio and ABC News and official stations for music festivals like Lollapalooza and Bonnaroo. Slacker claims to have a music catalogue 10 times the size of rival online audio platform Pandora. All Slacker’s stations can be personalized by the listener, and Xbox Kinect allows users to control programming through gestures and voice commands. The app is also available for mobile devices and in-car listening via smartphone. In November of 2011, Ford announced it would make Slacker available in new cars via the Ford Sync AppLink. The Slacker app integration allows drivers to store music for listening in areas where they don’t get cell phone reception. Other online audio platforms have partnered with Microsoft’s Xbox Live network in the past. In October 2011 Clear Channel’s iHeartRadio app became available for free to Xbox Gold subscribers. The partnership gives Xbox Live Gold members access to iHeartRadio’s 800+ live broadcast and digital-only radio stations, from 150 cities around the U.S., as well as custom stations and other personalized listening and programming features.
WPP's Media Innovation Group and Vibrant Media have been hit with potential class-action lawsuits for allegedly circumventing the browser settings of Safari users in order to place tracking cookies on their computers. New York resident Michael Frohberg and California resident Andy Wu allege in a complaint filed in federal court in Brooklyn that they were "shocked, humiliated, and angered" to learn that Media Innovation Group "hacked their devices and obtained private end user iformation about them without their permission and against their will." In a separate lawsuit also filed in federal court in Brooklyn, New York resident Daniel Mazzone and California resident Michelle Kuswanto make nearly identical allegations against Vibrant Media. All of the consumers are seeking class-action status. They quietly filed the cases late last month. WPP declined to comment on the allegations. Vibrant Media hasn't yet responded to Online Media Daily's request for comment. The lawsuits stem from a report by grad student Jonathan Mayer, who published research in February stating that WPP, PointRoll, Google and Vibrant Media circumvented Safari's built-in privacy settings. Unlike other browsers, Safari blocks third-party tracking cookies by default. But the Web companies developed a hack that allowed them to track Safari users despite the browser settings, Mayer reported. Google, PointRoll and Vibrant Media confirmed Mayer's report in February, and said they had stopped tracking Safari users or would soon do so. WPP has never commented. Google acknowledged that it used a workaround to Safari's cookie-blocking in order to allow users to post that they liked an ad via the +1 button. But once the workaround was in place, Google was able to track Safari users anonymously as they surfed the Web. PointRoll said it conducted a "limited test" in order to determine the effectiveness of mobile ads. Google and PointRoll were sued shortly after Mayer's report was published. Those cases are pending. The new lawsuits against WPP and Vibrant Media allege that the companies violated the federal computer fraud law, as well as consumer protection laws in New York and California. The case against WPP specifically alleges that the company violated its privacy policy, which said people could configure their browsers to block cookies. Other privacy lawsuits against Web companies have hit roadblocks when users weren't able to allege economic injury. The consumers who are suing WPP and Vibrant Media attempt to get around that hurdle by alleging that their browsing data is valuable in itself. As evidence, they refer to Google's decision to allow pay users who allow the company to track them with up to $25 in gift cards.
June brought more bad news for the newspaper industry, in the form of another negative forecast from Moody’s, the ratings agency. Moody’s senior credit officer John Puchalla warned in stark terms that earnings will drop over the next several years, as digital revenue growth fails to offset continuing losses on the print side. “Revenue declines are relentless, and industry efforts to grow the digital business and reduce costs are not sufficient to offset pricing pressure and print volume losses,” according to Puchalla, who gave the entire newspaper business a “negative” outlook. That’s due, in part, to the fact that newspapers still haven’t figured out how to monetize their digital products at anywhere near the rate of print products. Indeed, while the digital transition holds out the promise of cost savings on printing and distribution, Puchalla noted “the revenue loss is still too great for companies to make the switch yet.” In May Puchalla wrote another report, “Newspaper Pensions: A Hole in the Bucket,” warning that funding pension obligations is putting newspapers at risk of financial ruin and depriving them of cash needed for debt reduction and capital investment. Looking at Gannett, NYTCO and McClatchy specifically, Puchalla wrote: “We estimate that pension contributions comprised more than 20% of free cash flow in 2011, for all three companies combined, and we expect this to grow above 30% in 2012 and 2013.” According to the most recent figures from the Newspaper Association of America, total ad revenues dropped 6.9% from $5.5 billion in the first quarter of 2011 to nearly $5.2 billion in the first quarter of 2012. This was due to declines in print ad revenues, which fell 8.2% to $4.36 billion over the same period. Online ad revenues edged up 1% to $816 million.
Netflix Chief Content Officer Ted Sarandos reiterated last week that his company does not believe having Nickelodeon programming on Netflix is contributing to the kids’ network’s declining ratings. At the same time, he said Netflix’s relationship with Viacom, which owns Nick, MTV and Comedy Central, is a strong one. On Nick, he said: “It’s hard to imagine there isn’t some substitution effect, but if you look at the total hours of viewing of that specific content, you would say that there is no support for a cause and effect of our viewing hours and their ratings.” Viacom CEO Philippe Dauman has said he doesn’t believe Netflix is having a notable negative impact. Speaking at an investor event, Sarandos added that Disney Channel content on Netflix is arguably more appealing to visitors and that network’s ratings are solid. “We get newer and a higher volume of content from the Disney Channel, [which] is enjoying great ratings,” he said. He suggested that kids’ programming goes in cycles and once Nick produces a new run of hits, ratings will increase -- even if Netflix viewing goes up. As for negotiating to offer Viacom content, Sarandos said the company has “been a great partner in every territory figuring out the right content in the right window for the right fee. We’re very artful about how we license our content from them. They’ve been very artful about what they offer to us and everyone has very different agendas.” Separately, as far as tablet viewing, Sarandos said it is “relatively small” among Netflix viewers, but the company has been working on upgrading the tablet interface.