NEW YORK A day after Viacom sounded the alarm on a softening ad sales market, Comcast issued a similar warning, as the cable giant reported that its second-quarter ad revenue dropped 2 percent versus the year-ago period.
During its quarterly earnings call Wednesday, Comcast reported that it took in just under $400 million in ad revenue in the period, as local sales slumped.
"Unfortunately, this business area continues to feel the impact of a softer economy, particularly our local business as well as the auto and housing-related categories," said Comcast CFO Michael Angelakis.
While the advertising environment looks torpid, there is hope that political spending will spark a rally as election season heats up. "We did recognize some political spend this quarter, which accounted for approximately 2 percentage points of growth," Angelakis said. "We expect heavier political spending in the second half of this year."
While ad revenue accounted for just 4.5 percent of Comcast's overall sales of $8.55 billion in the quarter, the drop is still somewhat disconcerting, as it speaks to a downward trend among media conglomerates. On Tuesday, Viacom reported that it had increased its network ad sales by just 1 percent versus the second quarter of 2007.
One company bucking the trend is Scripps Networks Interactive, which includes hot cable properties like Food Network and HGTV. On July 24, SNI reported that it had increased its advertising revenue by 11 percent in the quarter, bringing in $271 million in sales.
All told, Comcast's programming segment continued to put up solid numbers in the quarter, posting $366 million in revenue, a 10 percent increase from $334 million a year ago, reflecting higher ratings and increased affiliate revenue. National ad sales for the segment -- which houses E!, Style Network, The Golf Channel, Versus and G4 -- were up in the quarter, although Comcast does not break those numbers out in its earnings statements.
Operating cash flow at the Comcast nets increased to $89 million, up 17 percent versus the prior-year period.
Comcast president and CEO Brian Roberts said that he did not anticipate seeing a marked increase in the cost of programming this year, although sports rights fees continue to command a premium. "There are definitely some things happening in the sports area that are creating some upward momentum on price as people create more networks with different teams or different leagues or different colleges," Roberts said. "Generally, I think we're comfortable that there's no great change that's going to happen on the edges. ... So I think we're going to have the ability to manage that cost line. It may creep up a bit one year and down a little the next, but so far this year, so far we're pretty much on track."
Looking down the road at the remainder of 2008, Comcast maintained its full-year guidance, targeting overall revenue growth between 8 percent to 10 percent over the $31 billion it accumulated in 2007.