Analyst predicts Big Media to bounce back despite weak Q4

Michelle Clancy ©RapidTVNews | 01-02-2012

Even though cable ratings weakened in the fourth quarter of 2011, at least one Wall Street analyst is bullish on the outlook for Big Media.
“We have seen enough evidence over the past six months to support the fact that diversified media is healthy, that must-have content will be monetised, and that there is still significant growth in this business,” writes Wells Fargo Securities’ Marci Ryvicker in a report on the sector. Not everyone agrees, pointing to lacklustre end-of-year results, due in part to faltering cable ratings that seem to mirror the broader market. Nomura Securities analyst Michael Nathanson said that "News Corp.’s cable network programming was one of the few bright spots [in Q4] with 9% growth. In contrast, the quarter’s ratings saw 7% live ratings declines at Time Warner, Viacom, Comcast/NBCU and double-digit declines at Disney (13%)."
Those ratings slumps have led Wall Street to revise their outlooks down for the sector. Ryvicker however expects CBS, News Corp. and Time Warner to outperform the overall market while Disney and Viacom will hold their own.
Helping things along is the fact that “programmers have become more protective of their content, which should protect long term monetisation.”
That has been borne out by the fact that Netflix has not been able to strike streaming deals with Starz and HBO; also the willingness to pay for premium sports content (ESPN re-upped its carriage fees at a hefty premium this fall) bodes well. Netflix in fact is “healthy enough to continue to purchase content, but not strong enough to significantly disrupt the current ecosystem,” she noted, bottom-lining the reality of the marketplace.
She's not bullish on all companies, however, particularly singling out Disney as one to be wary of. She also acknowledges that media will feel the burn if the economy worsens as more consumers turn to less expensive means of entertainment than the box-office and premium-tier cable subscriptions.
Despite ESPN's hike in carriage fees, she said that Disney will find the sports juggernaut to be a bit of an albatross when it comes to growth. The House of Mouse will also be pinched by continuing weak box-office sales, while Disney-owned national TV network ABC continues to be an also-ran when it comes to hit series.
On the flip side, Disney is challenging Viacom when it comes to kids' TV fare, and Nickelodeon may see a bite taken out of its ad sales as a result.