• by Wayne Friedman , May 11, 2010

A surging TV advertising market has been kind to the media companies -- but less so for Viacom. Long-term, however, this might be good news for investors for that company.

Viacom has not seen the advertising gains of its competitors: Time Warner, Discovery Communications, Fox Cable networks or Scripps Television. It only posted a slim 1% gain in domestic advertising revenues for the first-quarter selling period.

This was on the low end for the media industry -- Time Warner had a 9% hike; Discovery, a 10% plus gain; Scripps pulled in a 14% improvement; and there was 19% more at the Fox Cable networks.

Richard Greenfield, media analyst of BTIG Research, says much of Viacom's poor results stemmed from MTV Networks' prior-year upfront sales. In fairness, they were also negative for many broadcast and cable networks.

He says MTV's 2009 upfront witnessed high-single-percentage decreases from 2008 for the cost-per-thousand viewers. It didn't help that MTV was also in a bit of a ratings downturn.

But MTV ratings have rebounded recently -- due to controversial series "Jersey Shore," among others -- and Greenfield expects ad revenues to now steadily climb, with a 1% increase in worldwide ad revenues in fiscal 2010, and a 5% hike in fiscal 2011.

Viacom has been able to maintain revenue and earnings consistency -- even in the down times for ad revenues and ratings -- due to double-digit percentage cable network subscriber fees.

With a revival of its ratings, he believes this gives the company additional leverage as it goes into a series of distribution renewal deals over the next two years.

That spells a big upside, and Greenfield has put Viacom on its "buy" list with a $42 stock price target. Currently, the stock is trading at around $34.