Media giants ride
streaming, cable fees past ad uncertainty
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[November 06, 2014]
By Lisa Richwine
LOS ANGELES (Reuters) - Major media
companies have become far less dependent on the cyclical advertising
market, reporting another strong quarter of profits boosted by checks
written by streaming services such as Netlfix Inc and fees from cable
Time Warner Inc, CBS Corp and Twenty-First Century Fox each reported
profits that beat Wall Street expectations for the September
quarter, even as advertising showed pockets of weakness.
Media companies are benefiting as consumers change their viewing
habits and watch more content via online streaming options. While
that's hurt the TV ratings that determine what advertisers pay, it
has opened lucrative new revenue sources from services such as
Netflix and Amazon.com that need TV shows to lure subscribers.
CBS, owner of the most-watched U.S. television network, for the
first time reported that less than half of its revenue came from
advertising, down from more than 70 percent a few years ago. The
company diversified its business by licensing content to Netflix and
other streaming services, plus pressing for hefty new
"retransmission" fees from pay TV operators to air its hit shows
such as "NCIS" and "The Big Bang Theory."
Those fees and other non-advertising sources made up 54 percent of
CBS's overall revenue for the September quarter. The company posted
adjusted operating income of $814 million and revenue of $3.4
"We achieved these results because of the continued growth in our
diversified set of revenue sources," CBS CEO Leslie Moonves said on
a conference call.
"What we are seeing is that the world of content, monetization
continues to expand across new devices and new distribution
Other media companies reduced their reliance on advertising. Rupert
Murdoch's Fox generated 26 percent of its revenue from advertising
for the fiscal year that ended in June 2014, down from 30 percent
two years earlier.
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Ad revenue at Fox's broadcast networks fell 5 percent in the most
recent quarter, but was offset by higher fees from pay TV operators,
the company said. Hits from its film studio also contributed to its
$1.04 billion in net income attributable to stockholders.
Advertising revenue rose at its cable channels.
At Time Warner, advertising revenue for the nine months through
September was 17 percent, about 1 percent below a year earlier.
Ad revenues at its Turner networks fell 2 percent in international
markets for the September quarter, while it remained flat in the
U.S. It offset slack ad sales with higher fees for cable networks
and premium channel HBO, which alone accounted for 21 percent of its
$6.2 billion in quarterly revenue.
Advertising may drag on media companies in the months ahead.
Discovery Communications CEO David Zaslav told analysts on Tuesday
the "scatter" market for last-minute ads had softened. "There is no
question that in the last month that things have slowed," he said.
(Reporting by Lisa Richwine; Editing by Ronald Grover and Ken Wills)
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