Ad Recovery Remains Elusive for MTV Nets

The advertising marketplace in the fourth quarter began limping down the long road to recovery, as was demonstrated by earnings reports issued by a half-dozen media companies over the course of the last 10 days.  And while some programmers have covered a lot of ground, Viacom’s MTV Networks are still just getting out of the gate.

Viacom posted a 4 percent drop in domestic advertising revenue in Q4 ‘09, as the MTV nets continued to struggle in prime time. Per Nielsen ratings data, Comedy Central’s nightly deliveries fell 16 percent to 1.01 million total viewers, while the 18-34 demo dropped 19 percent and 18-49s declined 16 percent. VH1 suffered similar losses, while Spike TV was off 7 percent in prime.

MTV fell 9 percent in Q4, with an average nightly draw of 715,000 viewers, and while those results weren’t necessarily encouraging, they were an improvement on the first half of the year, when the network was down in the low teens (on a percentile basis).

Among the bright spots at MTVN were: BET, which was up 12 percent in prime and grew 16 percent among viewers 18-49, and Nickelodeon, which held its ground as ad-supported cable’s top-rated kids’ network.  

Affiliate revenue to some degree helped compensate for the drop in ad sales dollars, as Viacom’s subscriber fees were up 10 percent in the quarter. Viacom chief financial officer Tom Dooley on Thursday told investors that “nearly 80 percent of the growth came from rate increases, while approximately 20 percent was from adding subscribers.”

All told, the media networks group posted $2.33 billion in overall revenue, down 6 percent from the fourth quarter of 2008. Operating income was up 3 percent to $921 million.

Viacom CEO Philippe Dauman said he remains “cautiously optimistic” about the Q1 ad sales marketplace, telling analysts that he anticipates “sequential improvement” in the current financial period. “The tone is clearly more positive,” Dauman said, adding that “improving ratings at MTV is the top priority for management.”

Dauman added that the success of unscripted series like Jersey Shore and Teen Mom have helped grow MTV’s ratings by 20 percent in the first five weeks of 2010. “We’re building on this momentum with returning hit series as well as new shows,” he said. “We’re not out of the economic woods yet––the unemployment rate continues to be a serious concern for all marketers––but we do see growing signs of strength as more advertisers return to the market and strong new categories emerge.”

Looking ahead, Dooley sounded a note of caution, saying that visibility remains limited. “While pricing on upfront inventory obviously pulled us down, the scatter market remains strong,” Dooley said. “We’ll see what our demand is as we progress. All I can say right now is, based on where we are currently, we do expect sequential improvement in the first quarter.”

Dauman spoke briefly about Epix, a joint venture launched in Q4 by Viacom, Lionsgate Entertainment and MGM Studios. The Viacom chief said the movie service will be available in nearly 20 million homes by May, thanks to recent distribution deals with Cox Communications, Mediacom, Charter Communications, the National Cable Television Cooperative and Verizon’s FiOS TV.

To date, Viacom has invested $82 million in Epix. Thus far, the conglomerate has taken in some $110 million in payment for studio titles it has delivered to the service. “As we ramp up distribution, the revenues will start coming in,” Dauman said.

In early afternoon trading, shares of Viacom were up 32 cents, or 1.05 percent, to $30.54. Since Jan. 2, 2009, the company’s stock has increased in value by 45 percent.

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