Viacom’s Nickelodeon Continues Its Ratings Uptrend Into 2014

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Viacom‘s (NASDAQ:VIA) Nickelodeon network continues its ratings uptrend into 2014 and closed February as the top basic cable network with kids 2-11 and total viewers, marking 13 straight months of prior-year gains. [1] Higher ratings translate into higher advertising revenues for the content owners such as Viacom. 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.

It was the usual list for Nickelodeon in February with SpongeBob SquarePants leading the ratings followed by Sanjay and Craig and Teenage Mutant Ninja Turtles. These three shows continue to be the most popular on Nickelodeon, and attracted 3.3 million, 2.8 million and 3 million total viewers respectively. [1] The network’s latest live-action hit Every Witch Way ranked as the No. 1 program with kids 2-11 and was up 24% in ratings.  Additionally, Nick launched a new animated series, Breadwinners, which also drew 2.8 million total viewers. [1]

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Higher ratings at Nickelodeon, primarily drives the advertising revenues for Viacom. Nickelodeon’s advertising revenues plunged 11% in 2012 to an estimated $726 million as compared to $815 million in the prior year period. Both the quality of its programming and its appeal to kids were lacking in 2012 and this led to a significant decline in ratings. However, since the end of 2012, Viacom decided to bring more original programming, which boosted the network’s ratings. For 2013, the network’s advertising revenues amounted to $703 million, marking another 3% decline. However, given the network’s efforts to revamp content, we believe Nickelodeon’s advertising revenues will pick up in 2014 to an estimated $738 million.

Nickelodeon also generates revenues through subscription. Currently, the network has a subscriber base of close to 100 million and an estimated monthly fee per subscriber of $0.52. This translates into annual subscription revenue of $621 million. Nickelodeon’s subscription revenues have grown at an average annual rate of over 5% in the past years and we expect it to continue to grow. If we account for Nickelodeon internationally, the revenues will be much higher. Globally, Viacom reaches 330 million households across 110 countries, and it is poised to benefit from the surge in Nickelodeon’s viewership as television continues to dominate global ad spending.

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. [2] 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. [3] We expect a slight uptick in 2014 advertisement spending due to the FIFA World Cup soccer tournament, the Winter Olympics and the U.S. midterm elections. Content owners such as Viacom will benefit from the advertising growth as more than 35% of Viacom’s revenues are derived from advertising related businesses (Also See – Continued Growth At Media Networks And Lower Expenses Boost Viacom’s Q1 Earnings).

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Notes:
  1. NICKELODEON WINS FEBRUARYWITHKIDSANDTOTAL VIEWERS, Nickelodeon’s Press Release, Feb 25, 2014 [] [] []
  2. GLOBAL ADVIEW PULSE LITE – Q3 2013, Nielsen, Jan 22, 2014 []
  3. TV REMAINS THE REIGNING CHAMP, BUT DISPLAY INTERNET ADS ARE THE MVPS OF 3Q, Nielsen, Jan 27, 2014 []