Here's Some Concerning Data About Primetime TV

According to the Nielsen’s latest C3 ratings data [commercial ratings with 3 days of DVR playback], both broadcast primetime and cable primetime declined during the week ended February 28, 2016. Nielsen’s C3 ratings act as the primary barometer for the US TV advertising market.

Goldman Sachs’ TV Ratings Weekly mentioned the performance through week nine of 1Q16:

• Broadcast primetime was down 11 percent y/y, with NBC down 33 percent, ABC down 20 percent and FOX down 16 percent. The declines more than offset the 27 percent growth at CBS due to the Super Bowl.

On a sequential comparison, ratings were down 5 percent in 4Q15, with ABC down 14 percent, CBS down 6 percent and FOX down 3 percent. These declines more than offset the 1 percent growth at NBC.

• Broadcast primetime ex-sports was down 11 percent y/y, with NBC down 15 percent, ABC down 18 percent, FOX down 7 percent and CBS down 5 percent.
• Cable primetime declined 3 percent y/y, which marked an improvement from the 7 percent y/y decline recorded in 4Q15.

Total Day Ratings For 1Q16

• Walt Disney Co DIS – down 10 percent, versus down 11 percent in 4Q15
• Discovery Communications Inc. DISCA – down 5 percent, versus down 11 percent in 4Q15
• Comcast Corporation CMCSA – down 7 percent, versus down 11 percent in 4Q15
• Time Warner Inc TWX – down 6 percent, versus down 3 percent in 4Q15
• Viacom, Inc. VIAB – down 4 percent, versus down 4 percent in 4Q15
• AMC Networks Inc AMCX – Up 2 percent, versus down 3 percent in 4Q15
• Scripps Networks Interactive, Inc. SNI – Up 3 percent, versus down 1 percent in 4Q15
• Twenty-First Century Fox Inc FOXA – Up 6 percent, versus down 8 percent in 4Q15

ESPN Slowdown

Morgan Stanley’s Benjamin Swinburne maintained an Equal-weight rating for Walt Disney, with a price target of $100. The analyst expressed concern regarding disappointing cable network affiliate revenue growth in F1Q16, while reducing the 2017 estimates.

“While ESPN is undoubtedly one of the most popular cable networks in the bundle, our long-term view is that ecosystem shifts - in consumer behavior and distributor packaging- will reduce the distribution levels of ALL fully distributed cable networks,” analyst Benjamin Swinburne wrote.

Swinburne mentioned that ESPN's its fixed and long duration cost structure weakens its relative positioning among networks with respect to EBIT growth sustainability. He expects ESPN to suffer from around 2 percent sub erosion annually over the next three years, “as distributors drive the adoption of sports-free TV packages to alleviate costs associated with carrying sports networks.”

Disney is likely to miss its prior 2014-2016 guidance for total cable EBIT growth of a mid-single digit CAGR. Swinburne expects the company’s total cable EBIT to decline around 7-8 percent year-over-year in FY17.