Viacom’s (NASDAQ:VIA) Nickelodeon has recently seen the best quarterly ratings in the last 16 years.  This is welcome news for Viacom as higher ratings will translate into higher advertising revenues. This could prove meaningful as Nickelodeon U.S. contributes more than 13% to the company’s value, according to our estimates. The contribution is much more significant if we account for the global operations. Globally, Viacom reaches 330 million households across 110 countries, and it is poised to benefit from the surge in Nickelodeon’s ratings as television continues to dominate global ad spending.
How Is Nickelodeon’s Advertising Trending?
Television is the most important medium for advertising and accounts for close to 58% of global ad spend.  According to the latest report by Nielsen, global TV ad expenditures grew 4.2% on a year-over-year basis for the first half of 2013.  Another research by PwC states that television advertising revenues will grow 25% in the next four years to $200 billion. 
Nickelodeon saw poor ratings in 2012 and its advertising revenue fell 11% y-o-y to an estimated $726 million. The network’s viewership last year had declined not only due to the proliferation of alternative video platforms but also because of Nickelodeon’s own problems. Both the quality of its programming and appeal to kids were lacking in 2012. However, since the end of 2012, Viacom decided to bring more original programming, which boosted the network’s ratings. We now estimate Nickelodeon’s advertising revenues to be around $770 million in 2013.
What Is Driving The Ratings?
The network posted gains of 12% in the demographic 2-11, 32% in demographic 2-5, and 6% in total viewers for the third quarter of 2013.  The higher ratings were driven by Sam & Cat, which debuted earlier this summer and averaged 2.9 million total viewers, up 17% over last year. The Haunted Hathaways saw a 12% gain while the new series Sanjay & Craig averaged 2.9 million total viewers. Nick at Nite was up 67% to become basic cable’s top network with women 18-49.  In the first half of 2013, the network’s ratings were fueled by solid performances from SpongeBob SquarePants, which ranks as the top animated series. The network’s original TV movie, Swindle, attracted 4.2 million total viewers during its August 24 primetime premiere.  While it will be interesting to see if Nickelodeon ratings continue to move northward, the network for now continues to drive advertisement growth for Viacom.Notes:
- NICKELODEON’S 3Q13 PERFORMANCE NABS ITS HIGHEST QUARTERLY GAINS IN 16 YEARS, Nickelodeon’s Press Release, Oct 1, 2013 [↩] [↩] [↩]
- GLOBAL AD SPEND: WITH DOUBLE DIGIT GAINS, DISPLAY ADS DRIVE IN-YOUR-FACE RESULTS, Nielsen, Oct 22, 2013 [↩] [↩]
- Global entertainment and media outlook: 2013-2017, Price Waterhouse Coopers [↩]
- Swindle Premieres to 4.2 Million Viewers, Nick And More, Aug 27, 2013 [↩]