How Are TBS And TNT Network Ratings Trending?

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Time Warner

Time Warner’s (NYSE:TWX) TBS and TNT networks have been riding high on the success of its content. While TNT scored four of basic cable’s top 15 original dramas, TBS ranked as basic cable’s top network in primetime delivery of adults 18-49 for the first quarter of 2014. [1] The network had stayed at the top in the same demo for all of 2013. We estimate that TBS and TNT U.S. contribute more than 20% to Time Warner’s stock value. We expect this ratings uptrend to continue, given the networks’ continued focus on better content and original programming. Higher viewership and ratings will translate into better advertising revenues for TNT and TBS. See our complete analysis for Time Warner

What Is Driving Growth At TNT And TBS?

TBS’ Cougar Town, Ground Floor and Men At Work are three of basic cable’s Top 10 original comedies for the quarter among adults 18-34 and adults 18-49.  Cougar Town has drawn 1.2 million viewers in Live + 7 delivery so far this quarter among adults 18-49. (Briefly, on terminology: “Live + 7 ” refers to the ratings for live telecast and the first seven days of viewership on DVR))  Ground Floor chalked up 1.8 million viewers while Men at Work averaged 1.7 million viewers during the quarter. TBS’s CONAN grew by 12% over Q4 2013 in 18-34 demo for Live+7 delivery. [1] There is no surprise element for the basic cable’s top off-net show with The Big Bang Theory continuing the lead.

TNT network continues to benefit from Major Crimes, Rizzoli & Isles, Perception and Dallas. Major Crimes leads TNT’s winter slate of scripted dramas with 7.4 million viewers in Live + 7 delivery. Rizzoli & Isles drew 5.1 million viewers while Perception averaged 2.9 million viewers as it wraps up its third season. TNT’s real-life investigation series Cold Justice in its second season saw 19% growth among adults 18-49 compared to season one. [2]

Positive Trends In Advertising

The advertising market trended well in 2013, despite the absence of the Olympics or high political spending. By the end of the first three quarters of 2013 (latest Nielsen data available), global advertising spend grew by 3.2% as compared to the prior year period. However, the North American region saw a slight decline of 1.3% during the same period. [3] This can be attributed to the absence of heavy political advertisements versus the prior year. Television as a medium continues to show steady growth.  With a 4% increase in advertising spend for the third quarter of 2013, it accounted for 58% of the overall market, according to Nielsen estimates. [4] We expect a slight uptick in 2014 advertisement spending primarily due to the U.S. midterm elections. TNT and TBS will benefit from the advertising growth as more than 40% of the networks revenues comes from advertising.

Advertising has been trending well for both the networks. TNT’s advertising revenues has grown from $873 million in 2008 to $1.14 billion in 2013, representing an annual average growth rate of 5.5%. Similarly, TBS’ advertising revenues have also grown at similar rate to $562 million in 2013. [5] Given the ratings uptrend and the networks focus on better content and original programming, we expect the advertising growth to continue. We estimate TNT’s advertising revenues to be around $1.4 billion and TBS’ advertising revenue around $700 million by the end of our forecast period.

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Notes:
  1. TBS Ranks #1 on Basic Cable with Adults 18-49 in Prime for the Quarter, TBS Press Release, Mar 26, 2014 [] []
  2. TNT SCORES FOUR OF BASIC CABLE’S TOP 15 ORIGINAL DRAMAS, TNT News Room, Mar 26, 2014 []
  3. GLOBAL ADVIEW PULSE LITE – Q3 2013, Nielsen, Jan 22, 2014 []
  4. TV REMAINS THE REIGNING CHAMP, BUT DISPLAY INTERNET ADS ARE THE MVPS OF 3Q, Nielsen, Jan 27, 2014 []
  5. Time Warner’s SEC Filings []