• by Paul Gough , August 18, 2003

While some early indicators would suggest that the national cable ad marketplace may have slowed down during the second quarter of 2003, initial reports from publicly-held cable network companies indicate strong ad momentum during the quarter, with many networks predicting ad volume would increase in the second half of the year.

Financial data released by big and smaller players in the industry show most channels with ad revenues in the second quarter increasing by double digits. Several companies, including Discovery and the Hallmark Channel, expect the double-digit increases to continue through the rest of the year in what Discovery co-parent Liberty Media called a strong TV ad marketplace.

The financials appear to contradict findings from other industry sources suggesting that network cable TV ad spending actually declined during the second quarter.

The cable network revenue figures, meanwhile, follow a report late last month by the Cabletelevision Advertising Bureau, which estimated cable's upfront would increase 21% to $5.68 billion. That compares to a 12% increase to $9.2 billion for the broadcast upfront and a 10% rise for the syndicated upfront to $2.2 billion.

For the second quarter, gross ad revenue at the Discovery Networks rose 22%, though the breakouts weren't available. Liberty, which owns half of Discovery, said there had been strong ratings improvements at the flagship channel due to an investment in programming and a stronger schedule. Liberty expects a percentage increase in revenue in the mid-teens through the rest of the year, it said in a filing with the Securities and Exchange Commission.

News Corp., which owns Fox News Channel, FX and regional sports networks, saw increased ad revenues across the board. Higher ad sales more than recovered the loss earlier this year due to pre-emptions and the high cost to cover the war in Iraq. While Fox does not break out advertising revenue in its financials, Fox's revenues jumped to $669 million in the second quarter compared to $564 million a year ago. There was also an increase in ad sales at FX and at the regional sport networks, although this wasn't quantified.

At AOL Time Warner, its networks division's ad revenues increased 17% in the quarter. Although the data isn't broken out, the Turner Networks' ad revenues rose 16% compared to the same period a year ago and at The WB ad revenue increased 23%. AOL Time Warner said it was due to higher CPMs and ratings across the networks along with higher revenues from additional NBA playoffs airing on TNT.

E.W. Scripps Co.'s entire balance sheet was helped by strong results at Home & Garden Television and Food Network. Scripps Networks, which includes HGTV and other cable networks, is the company's fastest-growing business unit. Across the entire Scripps Networks - which also includes DIY and Fine Living - advertising revenue grew 31% to $117 million. Scripps expects third quarter advertising revenue to increase 25%-30% over the same period a year ago, well above the 2%-4% increase of newspaper advertising revenues it expects in the third quarter. Scripps Networks' advertising revenues were up 32% to $30.7 million in July, compared to $23.3 million in July 2002. So far this year, Scripps Networks' advertising revenues are $240.6 million compared to $181.8 million on July 31, 2002. HGTV's subscribers grew 3.3% to 80.9 million and Food Network's subscribers grew 5.2% to 79.2 million during the period.

Hallmark Channel, two years into its rebranding, reported ad revenues of $18.6 million, 60% higher than second quarter of 2002. The channel also reported increased ratings in household delivery and other metrics, along with a 62% increase in distribution to just short of 53 million subscribers in the United States.

"That's a pretty strong effort for a standalone channel," said David Evans, president/CEO of Hallmark Channel's parent company, Crown Media Holdings Inc. "It's a tremendous number of achievements in a short time."

Evans said the recently concluded upfront led to the preselling of a majority of its advertising slots beginning in September, with 35 new advertisers signing on. Evans said ad revenues in the upfront jumped 92% compared to last year's upfront. He said gains in distribution and ratings helped with Madison Avenue. Hallmark Channel's goals were to sell 100 clients and $50 million-$55 million; it ended up with 110 companies and almost $58 million.

"The upfront was really solid and I think positions us really great for the fourth quarter of this year and the three quarters of next year," Evans said.

Another independent cable network, The Outdoor Channel, said advertising sales rose 56% in the first half of 2003. It said the upfront process was helped by a Nielsen Media Research study showing that the network has one of the highest concentrations of male viewers anywhere on TV.