Nickelodeon Will Continue To Drive Growth For Viacom

by Trefis Team
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Viacom’s (NASDAQ:VIA) Nickelodeon has seen a solid rebound in ratings with the help of new live-action and animated hits. The network has led the advertisement growth for the company in the recent quarters. The ad market itself has been doing well and television remains the most important medium for advertisers to reach the people. According to our estimates, Nickelodeon U.S. alone contributes close to 15% to Viacom’s value.  Given the trend in ratings, we believe Viacom will continue to benefit from Nickelodeon’s resurgence.

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Nickelodeon Ratings Continue To Grow

In the first half of 2013, Nickelodeon has seen ratings growth as compared to the same period previous year. The network’s gains were fueled by solid performances from SpongeBob SquarePants, which ranks as the top animated series. The pre-school lineup of the same series netted Nickelodeon the top spot with pre-schoolers for July. [1] The network’s latest original TV movie, Swindle, attracted 4.2 million total viewers during its August 24 primetime premiere. Nickelodeon topped cable with 22% rise in total viewership, beating Disney and Adult Swim, for the week ending Sunday August 25. [2] However, the network recently started airing season 2 of The Legend of Korra and the premiere of the series was met with less viewers than expected. Talking about the decline in viewership, Nick and More tweeted, “Nick’s ratings have been low since late-August (lower than norm) so that could play a factor into Korra.” [3] While it will be interesting to see if Nickelodeon ratings continue to move northward, the network continues to drive the advertisement growth for Viacom.

How Is Advertising Market Trending?

According to a new report from Kantar Media, TV spend accounted 51% of the $35.8 billion that was invested in all U.S. media during the second quarter of 2013. While national cable saw 15% rise in sales amounting to $7 billion, broadcast networks took in $5 billion in ad time, up 5% as compared to the same period previous year. [4] According to research by PwC, the TV advertising sector will pass the $200 billion revenue mark with global revenues valued at $209.4 billion in 2017, compared with $162.1 billion in 2012. [5] The spend on TV has been far more than on online ads and all other traditional media. While most of the traditional media markets are growing slowly or declining, television is poised to see healthy growth through 2017.  The chart below compares the reported TV ad spending growth rates in the U.S. with overall entertainment and media ad spend for 2009 through 2013, as well as PwC forecasts for TV and overall growth rates reaching out until 2017.

Viacom has seen gains in advertising due to the strong rebound in cable networks ratings. The advertising revenues grew 5% to $1.22 billion in the latest quarterly earnings driven by better ratings primarily at Nickelodeon and MTV networks. [6] The networks have been focusing on original programming and new content, which is helping it achieve higher viewership. We expect the Nickelodeon ratings to continue to grow and bolster Viacom’s overall revenue growth in the near term.

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Notes:
  1. Nickelodeon Ratings Highlights for July 2013, Nick And More, Jul 30, 2013 []
  2. Swindle Premieres to 4.2 Million Viewers, Nick And More, Aug 27, 2013 []
  3. The Legend Of Korra’ Season 2 Premiere Ratings Flop; Why The Low Ratings?, Latin Times, Sep 18, 2013 []
  4. Q2 TV Sales Up 6 Percent to $18.4 Billion, Adweek, Sep 9, 2013 []
  5. Global entertainment and media outlook: 2013-2017, Price Waterhouse Coopers []
  6. Viacom’s SEC Filings []
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