Free ContentFor Members Only
Home > MyersBizNet Economic Media Business Report > Good 3rd Quarter for the Media Biz: Jack Myers Weekly Wall Street Report 10-21

Good 3rd Quarter for the Media Biz: Jack Myers Weekly Wall Street Report 10-21

October 21, 2011
Business Fortune Cookie

Published: October 21, 2011 at 08:40 AM GMT
Last Updated: July 31, 2013 at 08:40 AM GMT

While analysts have been nervously watching for signs of growing economic uncertainty since around June, this week's quarterly report is a qualified sigh of relief. Analysts were relatively pleased with the numbers, and are hoping for an even livelier holiday quarter which is already underway.

Here's how it went in media:

KPCB partner Mary Meeker gave her annual presentation on Internet Trends at the Web 2.0 Summit in San Francisco this week, highlighting several factors, such as the surge in numbers of Internet users outside the U.S., mobile empowerment, and eCommerce. Her presentation can be watched here, and the slides are available here. The biggest quarterly release of the week came from Apple (AAPL), which was actually faulted as having a rare miss in revenue estimates while also having the best quarter for iPad sales ever. The stock came tumbling down slightly after it was reported that Apple sold fewer models of the new iPhone 4S than expected. However, since the iPhone's launch date was not during the usual summer season, there's good reason to believe that the softer-than-usual sales were just a hiccup rather than a trend.

But even that line of reasoning was not satisfactory for small brokerage firm BGC, which actually downgraded the company from Buy to Hold. Analyst Colin Gillis wrote in his note that Apple has to "constantly set records just to meet expectations," which seems rather unsustainable in the long term. While Gillis thinks Apple's fundamentals are strong, he'd rather bid his time and wait for a small change in investor perspective to knock the price down just under $400.

Analysts across the board were relatively pleased with Yahoo's (YHOO) results this week, even though concerns regarding display ad revenue remain. Net display revenue came in at a flat year-over-year growth of $449 million, which was below guidance and Barclays Capital (BCS) analyst Anthony DiClemente's estimate of +5% y/y. However, improved cost controls led to operating income of $177 million, beating DiClemente's estimate of $155 million. Barclays maintains an Equal Weight rating and $19 price target. Doug Anmuth from J.P. Morgan (JPM) thinks that investors will be willing to forgive Yahoo's less than perfect revenue growth if the focus remains on a deal (.pdf), which he believes it does. Anmuth maintains Yahoo's Neutral rating and $17 price target.

Cutting the Cord

One of the hot topics during the summer, the cord cutting debate might yet make a comeback if cable, satellite, and telecom companies' quarterly releases don't go as well as expected. According to a Hollywood Reporter roundup of media analysts, a clear consensus is still somewhat elusive on whether pay TV will win or lose in this upcoming quarter.

Credit Suisse's (CS) Spencer Wang, who in 2010 led the pack into the cord cutting debate, said on Wednesday that he remains "concerned on a secular basis about the risk of cord-cutting, given a difficult economic climate for consumers, consistent above-inflation increases in pricing to the consumer, and the growing availability of lower cost over-the-top (Internet-delivered) video services." However, Goldman Sachs' (GS) Jason Armstrong feels that cable trends are better now than versus a year ago, but telecom and satellites are worse off. Armstrong's mixed outlook notwithstanding, he feels that the "sequential rebound, with further improvement expected in the fourth quarter, combined with the woes at Netflix (NFLX) should continue to calm cord cutting fears."

TV ratings also did well this week, as Barclays DiClemente cited AMC's The Walking Dead, which opened its second season with the highest ever rating for a cable drama, and the 31 million NFL viewers who rolled over into prime-time and powered Fox into a "sizable victory in the 18-49 demo." ABC also "held its own" this week as eight of its shows made the prime-time top 25 rankings, even as the network faces some tough competition.

The DVR Difference

Nomura Americas media analyst Michael Nathanson's latest note explores how growing DVR penetration influences consumer behavior and rating standards used by advertisers (.pdf). As the industry enters its fifth season of using the C3 standard (commercial ratings using three days of DVR playback) instead of live viewing, some key differences are cropping up. Cable networks using C3 are posting ratings that are up 2.4%, as opposed to being down 2% when using live viewer data. In the third quarter, A18-49 viewing was up 0.7% when using C3, but that turned into a 3.3% decline if based on live viewing. Nathanson warns investors against making snap judgments based on live rating data alone.

And while Deutsche Bank's (DB) Matt Chesler has reaffirmed short-term advertising data points as mostly reassuring, he notes that brand-owners' decreased spending next year, at least in the first half, is simply inevitable.


The imminent downturn that analysts have been talking about for the last few months is, in fact, "creeping up on us," according to Chesler (.pdf). The real issue, however, is whether share prices have already priced in the inevitable drop in ad spending.

In his most recent note, Chesler, "on a precautionary basis," reduced his 2012 estimates to less than 1% organic revenue growth. However, as valuations are not demanding and some share prices have already underperformed, he perceives certain "early buying opportunities" for WPP (WPPGY), Omnicom (OMC), and IPSOS (EPA: IPS).

In looking to see what analysts can say for sure in spite of the downturn, Chesler focuses on four issues. First, the long-term fundamentals for these businesses are strong; second, their cost bases are flexible and can take a hit from decreased revenue; third, the stocks are already underperforming, so the warning of slashed ad budgets isn't anything new; and fourth, Chesler feels his estimates are positioned so that any forecast risk is moved to the upside rather than to the downside.

He has also released notes on Interpublic (IPG), lowering its rating from Buy to Hold (.pdf), and Omnicom (OMC), recommending to buy shares (.pdf) as the company has just come off a strong third quarter and represents "one of the best combinations of revenue growth and margin expansion in a creeping ad market downturn."

And to cap it all off, you can add one more voice to the Occupy Wall Street fray: Lemony Snicket.

The third quarter that wasn't -- actually is.

You are receiving this e-mail as a corporate subscriber to Jack Myers Media Business Report. Re-distribution in any form, except among approved individuals within your company, is prohibited. As a subscriber you have full access to all archives and reports at www.jackmyers.com. If you require your ID and password, contact maryann@jackmyers.com

add this social bookmark link

Post a Comment

Commentary Archives

October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014

See all Archived Material


The MediaVillage Articles Club: Friendsgiving
In celebration of the giving season, this month's Articles Club was billed as a Friendsgiving-style potluck. Were it not for some delicious chili and cornbread from our hostess, Chelsea, the evening may have fallen short of expectations. (I came armed with store-bought desserts and we also ditched a called-for side dish in favor of some Cabernet.) Our conversation covered a lot of ground this month even if our dinner table spread did not. As we look ahead to 2016 we have set a resolution for more diversity in our slate of suggested reading. With all due respect to The New York Times, we are going to make more of an effort to share articles from other publications in the coming months.

Stuart Elliott Revives "20 Questions" -- A Popular Holiday Tradition
One of the best friends of a columnist, apart from an elastic deadline, is the perennial feature, and I was known for one during my more than two decades writing for my previous employer. It was called "20 Questions," a column that would run before or after major holidays. Since we're about to celebrate Thanksgiving I thought it would be fun to revive it for my MediaVillage audience.

Pepsi on “Empire”: Coolest. Sponsor. Integration. Ever.
Call it the wave of the future, or a blast from the past. Pepsi’s sponsorship of Fox’s hit primetime serial “Empire” became virtually DVR-proof on this week’s episode while also evoking that long-ago era of television when advertisers were integral to the presentation and content of programming.

Office Smackdown! Baby Boomers vs. Millennials and Vice Versa
Have you noticed a difference (or ten) between Baby Boomers and Millennials in the workplace (and everyplace else, for that matter)? Especially the younger end of the former and the older segment of the latter? Of course you have -- and you aren't the only one.

SMI: Television Roars Back to Life; Digital Questionable?
Fresh off the back of soft results for many media owners in the third quarter of this year, the start of the new broadcast year has delivered some very heartening news for the television industry. Strong ad sales results for both the broadcast and cable sector helped the market to its best result of the year, with the total market up 15% compared to the same period last year.

DPAA: Audience Targeting -- Are You Missing the Mark?
With years of media fragmentation and increasing demands for better ROI, audience targeting has never been more valuable to marketers than it is today. The value for the marketers employing it, of course, includes better measurement and message delivery – and for those who fail to take advantage, smaller budgets or shorter careers.

Ten Expert Practices for Optimizing Team Performance
Visionary leaders are agents of change. Highly observant and great at reading situations, these managers know how to motivate teams to achieve new goals in the pursuit of excellence.

Net Neutrality Work-Arounds; Cutting Cords, Any Cords!
So you’ve got a MVPD subscription -- whether cable, satellite or telco -- plus broadband access and you’d like to watch video on some device or another … but you don’t know what exactly you’d like to watch and you don’t really feel like surfing 7,842 channels and web sites to find out what’s on and/or available. What do you do? Panic? Hope whatever MVPD or broadband provider you have gets smart enough to produce a guide that actually, uh, guides? Well, there are already a few gleams in the gloom out there.

NNN: When a Crisis Hits, Smart Marketers Like VW Know Where to Turn
Yesterday, Volkswagen began a print campaign in 13 newspapers across America. The purpose: To regain the trust of their customers following news of their emission issues. In the ad, CEO Michael Horn extends his apology and a special offer to those affected. Specifically, customers who qualify will be given a $500 prepaid Visa Card along with a $500 dealership card. This is the first official, public gesture that the company has made to address the consumer crisis and here at the Newspaper National Network we were honored to work with them in executing the initiative.

ABC Sales President Geri Wang on Media, Measurement and Mentoring
Geri Wang started as a physical therapy major in college but later changed to communications. Upon graduation she landed her first job working for Helen Johnston at Grey Advertising as a media research analyst. From there Geri was recruited by ABC, where she excelled. She is currently President of Sales, leading a team of nearly 300, and she is responsible for advertising sales and integrated marketing across the entire ABC portfolio including ABC Primetime, Daytime, News, Late-Night and Digital; the Disney/ABC Domestic Television Syndication Group; Fusion, and ABC Sales Development.

Unlike Certain Ads, This Column is Viewable
It seems that most weeks bring yet another jaw-dropping story from the wacky world of digital advertising. We’ve had bots, fraud, trading desks buying inventory from themselves and a host of other wonders. Last week though brought an excellent example of the genre, for which I’m grateful to Linda Holliday, the CEO of CITIA.com who brought it to my attention.

Driverless Cars and the New Automobile Era
We are now about 130 years into the automobile era. Starting with Karl Benz’s patent in the 1880s the automobile quickly became widespread with Henry Ford’s model of mass production scaling up the market 100 years ago.

MediaBizBuzz: Fox, Univision, Turner Broadcasting, Spotify and More
A roundup of the week's key news from MediaVillage member companies and trends from the wider media industry. This week, networks hit by fantasy sports woes, Fox gets creative with branding, and both Edward Snowden and "South Park" join the ad blocking debate.

Gender News Weekly: Barbie is for Boys, Too
"Inspired by Jack Myers’ upcoming book “The Future of Men: Masculinity in the Twenty-First Century,” this is a weekly blog series focused on gender equality, gender politics and the shift in gender norms in business and culture. Read on for this week’s news roundup."

Mindshare on Movember: Your Beard Has Good Intentions
This week on Mindshare’s Culture Vulture Live: Mike Yablonski talks about Movember -- that time of year when men let their facial hair grow out for a good cause.

Click Here for Membership Information