Oh, Barnacles! Analyst Chops Viacom’s Ad Forecast on Nick Ratings Drop

'SpongeBob' net in Hard Eight struggle

Nickelodeon’s ratings woes took a turn for the worse on Friday, as Credit Suisse analyst Spencer Wang lowered his forecast for Viacom’s quarterly ad revenue growth, citing the recent slippage in deliveries at the kids-targeted network.

In a report to investors titled “It’s 10 P.M., Do You Know Where Your Children Are?” Wang adjusted his FYQ1 ad growth forecast for Viacom from 6 percent to 3 percent, noting that ratings for Nickelodeon’s target demo (kids 2-11) have been falling steadily since August.

Per Nielsen live-plus-same-day-data, Nickelodeon in August fell 8 percent in total day, and while it retained a comfortable lead over rival Disney Channel, this would prove to be the beginning of an ongoing trend.

In September, kids 2-11 fell 11 percent year over year to 969,000 viewers. Nickelodeon dropped another 15 percent in the demo in October, which set the stage for an 18 percent falloff in November.

As Wang noted in his report, the double-digit declines are reason for concern, as Nickelodeon is famously stable. Before the wheels started coming off at the end of the summer, the biggest dive Nick took this year occurred in May, when kids 2-11 dipped 4 percent.

Wang acknowledged that things at Nickelodeon look less despairing when one examines ratings data culled from alternative sources. The analyst said that set-top-box data suggests “the magnitude of the decline is not as great as Nielsen depicts,” adding that the losses seem to be “closer to the mid- to high-single digits vs. the mid- to high-teens.”

STB data does not capture demos; as such, these ratings are merely directional.

Viacom CEO Philippe Dauman earlier this week reiterated that he is frustrated by the anomaly, adding that while he awaits feedback from the Media Ratings Council, there’s no fighting City Hall. “However imperfect Nielsen is, it’s the only game in town, so we have to live with it,” Dauman told investors during his keynote at the UBS Global Media and Communications Conference. “It is what it is. We’re going to move on.”

Nielsen vehemently denies any inconsistencies in its data set, but as Wang observed, “Recent data slipups . . . cannot rule out that market share shifts may have been exaggerated by possible measurement issues.”

Nickelodeon has assured advertisers it will furnish any necessary make-goods. Awarding compensatory avails will obviously tighten scatter inventory in the first quarter.

The ratings shortfall couldn’t come at a worse time for Nickelodeon, which like all kids networks, generates a disproportionately high percentage of its ad sales revenue during the holiday shopping season (aka, the Hard Eight). In the fourth quarter, Nick accounts for roughly one-quarter (24 percent) of Viacom’s overall ad sales haul.

If the ratings struggles suggest things are ho-ho-horrible at Nickelodeon, think again. The network has been the most-watched cable outlet on the dial for 66 quarters running, commands 75 percent of the GRPs in its competitive spread, and its biggest competitor, Disney Channel, is non-ad-supported.

In 2010, Nickelodeon took in $1.03 billion in net ad sales revenue, per SNL Kagan data. By comparison, Cartoon Network took in $388.5 million.