Analyst Doug Mitchelson of UBS Media thinks so -- and that especially means tougher news for CBS, as well as some pain for Discovery, and AMC networks. All three stocks took a hit on Friday.
Though sharply higher retransmission fees look good for CBS, “we do not believe the macro backdrop supports continued TV advertising strength, and expect decelerating national TV advertising in 2016 ex-Olympics,” said Mitchelson
CBS’ exposure to advertising has fallen dramatically over the years, to around 45% of its business -- good news for many investors. Still, CBS will find it tough to show positive comparisons in the months ahead to the previous advertising gains of the Super Bowl and political advertising efforts.
Discovery Communications could also get hit from an advertising slowdown. But other issues are a concern, including the shifting of viewers to more on-demand platforms,
and the coming of new “skinny” TV digital packages. For example, Mitchelson says Discovery is not current on Dish Network’s Sling TV, and he doesn’t expect it to be on
Hulu’s new digital base package of TV networks.
He also says there is “uncertainty regarding the shift to and cost of sports investments in Europe.” Discovery is the owner of the big European sports satellite channel, Eurosport.
For AMC, Mitchelson says double-digit rating declines for the likes of “Better Call Saul” and “Fear the Walking Dead” isn’t good news. He is also “increasingly wary” of AMC’s ability to diversify away from the aging “Walking Dead” series.
Other analysts believe the entire U.S. advertising market will continue to be healthy -- even for the second half of the year.
Brian Wieser of Pivotal Research Group’s most recent estimates are that --leaving out political and Olympic revenues -- the advertising industry is now expected to rise 4.5% for 2016, versus a previous 2.8% forecast.
Still, Wieser estimates while total national TV is expected to be up 10.6% for the third quarter, to $10.8 billion (mostly from the Olympics and political), it’s expected to drop slightly by 0.5% to $11.8 billion in the fourth quarter of this year.
Overall 2016 for national TV looks to be up 4.6% to $46.1 billion, sinking to about half that gain -- 2.5% -- in 2017, to $48.2 billion.
Who benefits from those now-smaller ad gains?