Entertainment Industry

Category: Cable Television

Worries linger about Nickelodeon's ratings slump

Nickelodeon's audience levels have fallen nearly 30% this season
Wall Street analysts peppered Viacom management Thursday with questions about the mysterious ratings slump at the company's premier children's television network Nickelodeon.

Nickelodeon's audience levels have fallen nearly 30% this season, prompting much speculation about the reasons behind the troubling drop. The issue is far from child's play. Nickelodeon is one of the most valuable channels in television as well as within the Viacom universe. 

Some analysts have theorized that the weak ratings could be attributed to shifts in viewing behavior. More children are watching Nickelodeon shows on demand through Netflix and Amazon.com digital streaming services, rather than watching the channel. 

Earlier this week, Time Warner Inc. Chief Executive Jeffrey Bewkes added his support to that theory, noting that his company's Cartoon Network, which competes with Nickelodeon, doesn't have that issue. In fact, Cartoon Network's ratings were up 14%.

 "We think part of the reason is that we don't have our programs sitting on an SVOD [subscription video-on-demand service] where parents can park their kids," Bewkes told analysts during Time Warner's earnings call Wednesday. "Obviously, that's taking some viewing away from some of the other animated channels."

Viacom executives pooh-poohed the theory.

"Netflix is present in less than a quarter of television households, and since we get the streaming data on our content, I can tell you that the time spent on Nickelodeon content on Netflix is approximately 2% of the time spent on our Nickelodeon channel," Viacom Chief Executive Philippe Dauman told analysts Thursday during his company's second-quarter earnings call.

"It would have a minimal impact here," Dauman said.

Instead, Viacom traces much of the ratings nosedive to a September change in the composition of the audience panel that Nielsen uses to derive its ratings. New participants in the Nielsen panel apparently watch less Nickelodeon than those they replaced.

Still, analysts are concerned.

"Nickelodeon has fallen to levels that you've never seen before," said one prominent analyst, Michael Nathanson of Nomura Securities, observed during Viacom's call. 

Nickelodeon's problems failed to dent investors' enthusiasm for Viacom's stock. The company's widely traded B-shares closed Thursday at $49.02 a share, up $1.59 a share.  Viacom reported a profit increase of 56% over the year-earlier period.  Revenue was up 2% to $3.33 billion.  

"We're going to focus on ways in which we can affect the Nickelodeon brand positively," Dauman told analysts before the opening bell. "Our pipeline is extremely strong. We're developing more new [episodes] of our popular series and more exciting new series. And of course, we're particularly excited about the revival of the [Teenage Ninja] Turtles franchise."


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Photo:  A scene from an older episode of "SpongeBob SquarePants." Credit:  Nickelodeon 

Cablevision plans to sell Clearview Cinemas

Cablevision Systems Corp. said it wants to exit the movie theater business.

The Bethpage, N.Y.-based cable company said it plans to sell its Clearview Cinemas circuit, which has 230 screens in 45 locations, to concentrate on its core business.DOLAN

"We think someone else could do better with that asset than we could,'' Chief Financial Officer Gregg Seibert said on a conference call with analysts Thursday. "Hopefully it will be a robust process."

The announcement came as Cablevision reported a sharp drop in earnings during the first quarter, when net income fell to $54 million compared to $104 million from the same time a year ago. Revenue was $1.7 billion, about the same as the first quarter of 2011.

The results reflected the sale of AMC Networks last year and an increase in spending to upgrade its network.

While Cablevision added more subscribers than expected -- 7,000 basic video subscribers -- shares in the company fell by more than 8% during early trading Thursday after results were reported.


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Photo: Cablevision Chief Executive Jim Dolan. Credit: Kathy Willens / Associated Press

Viacom profit up 56%, boosted by higher cable fees

Viacom Inc.'s second-quarter profit soared 56%, thanks to higher fees from pay-television operators and lower expenses at the company's Paramount Pictures movie studio.

For the quarter ended March 31, Viacom earned $585 million, or $1.07 per share, up from $376 million, or 63 cents a share, in the same period in 2011. Revenue grew 2% to $3.33 billion.

"Across our divisions we sharpened our focus on execution and efficiency while continuing to invest in programming that connects with audiences worldwide," Viacom Chief Executive Philippe Dauman told analysts in a Thursday morning conference call.  "Distribution continues to be a strong and steady driver for Viacom."

The New York-based media company's earnings exceeded analysts' estimates while revenue was largely within expectations. The company, controlled by billionaire Sumner Redstone, also spent about $700 million during the quarter to repurchase 14.7 million shares.

The bulk of the company's earnings came from its Media Networks unit, which includes cable channels MTV, Nickelodeon, Comedy Central, BET, VH1 and TV Land.  Revenue generated by cable channels grew 5% to $2.2 billion, driven by an increase in affiliate fees paid by cable and satellite television operators.  Affiliate fee revenue was up 17%. 

Media networks' operating income climbed 11% to $893 million. Domestic advertising revenue inched up 1%, while foreign advertising revenue remained flat. 

"We are seeing encouraging signs of a strengthening ad market," Dauman noted.

At the Los Angeles-based Paramount Pictures, which is celebrating its 100th anniversary this year, revenue dropped 5% to $1.17 billion.  The company attributed the lower revenue to a "less widely distributed mix of releases during the quarter," which included the highly profitable "The Devil Inside" and DreamWorks Pictures'  Eddie Murphy vehicle, "A Thousand Words," which flopped.

Theatrical revenue was down 19% to $326 million for the quarter.  The division was helped during the quarter by carry-over receipts from "Mission Impossible: Ghost Protocol," with Tom Cruise, which was released in the previous quarter.

Operating income at the film studio nearly tripled to $115 million, up from $39 million in the year-earlier period. The company said the studio's higher margin came from lower distribution costs.

"We are being disciplined in managing our expenses," Chief Operating Officer Thomas Dooley told the analysts.  


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Photo:  Eddie Murphy plays a cad named Jack in the DreamWorks comedy "A Thousand Words," released during the first quarter by Paramount Pictures.   Credit: Bruce McBroom / DreamWorks Pictures


Comcast continues to rally in FCC dispute with Tennis Channel

Tennis channel
Cable giant Comcast Corp. appears to be headed for a tie-breaker in its long-running dispute with the small, independently owned Tennis Channel.

In December, a Federal Communications Commission administrative judge issued a tentative ruling that Comcast had discriminated against the Tennis Channel by putting it at a competitive disadvantage.

After winning that ruling, the Santa Monica network demanded that Comcast immediately add the channel to Comcast's most widely distributed programming package. The move, which Comcast has been resisting, would make Tennis Channel available to nearly all of Comcast's 22 million cable subscribers. 

But on Wednesday the FCC general counsel said that the full FCC would decide the matter and that Comcast was not required to move Tennis Channel at this time.

The dispute, which began nearly three years ago, centers on Comcast's refusal to move the Tennis Channel to a less exclusive environment.

The Philadelphia company has said it placed the Tennis Channel in the sports tier as part of an agreement between the two companies when Comcast agreed to provide carriage.  However, Comcast appeared to run afoul of the rules because it offers the sports channels that it owns, the Golf Channel and NBC Sports (formerly known as Versus), in the basic programming package.

The Tennis Channel has argued that its location unfairly limits its revenue potential because channels receive fees from cable operators based on number of subscribers. 

If Comcast loses the case, it would be the first time that a cable operator was found in violation of federal anti-discrimination program carriage rules, which were established by the agency in 1993. Comcast lost a similar dispute Wednesday, this one with Bloomberg. 

On Wednesday, the FCC General Counsel Austin C. Schlick said the full commission should settle the Tennis Channel score.  It was not clear when the commission would make the final call. 

"The interim stay granted by the Office of General Counsel regarding the Tennis Channel is a welcome development, and we hope the full commission will follow suit," Comcast said in a statement. "There were procedural and substantive flaws in the [administrative judge's] decision, and we continue to believe it should not be upheld."

For its part, the Tennis Channel said the interim stay didn't change the administrative judge's findings. Instead, it was "simply a continuation of the status quo while the commission decides the procedural question.... We are pleased that the commission continues to move forward in resolving this dispute." 


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Photo: Tennis Channel's Bill Macatee and Martina Navratilova, center, interview Ana Ivanovic. Credit: Fred Mullane 

Sumner Redstone at Global Conference: "Take risks"

Sumner Redstone

Sumner Redstone has a regret.

His father, Michael “Mickey” Redstone, didn’t live to see his son’s unqualified success in the business world. Sumner Redstone -- who controls two of the world’s preeminent media companies, Viacom Inc. and CBS Corp. -- has memories of his father that were etched during the Depression when the family lived in a West Boston tenement. 

 “I can remember him carrying rolls of linoleum on his back,” Redstone said Wednesday during an appearance at the Milken Institute Global Conference in Beverly Hills.  “He believed in hard work.  He had to work hard, and I had to work hard.” 

The title of the Global Conference session was “What it Means to be an Entrepreneur: A conversation with Sumner Redstone.” Redstone was interviewed by Michael Milken, and the two men hadn’t gotten too far into their dialogue when Redstone groused that more than a quarter of a century ago, Milken charged him “an extra quarter-percent interest” on a loan that Redstone took out to begin building his empire.  

Redstone still seemed peeved. “I’ve been paying for it ever since,” Milken lamented.

The legacy of Redstone -- who is three weeks shy of his 89th birthday --- has been written by many, including by Redstone himself. And, on Wednesday, Redstone told his story again to a standing room crowd in a small conference room at the Beverly Hilton. 

The secret to success, the mogul said, was: “You have to be in control of your destiny.  You can’t work for anyone else.  It’s not about money, it’s about winning.  You have to have a passion to win.”  (That’s also the title of Redstone’s 2001 autobiography.)

“I’ve taken some perilous risks. But I never took them unless I was confident that the rewards far outweighed the risk,” Redstone said.   

Perhaps his biggest risk was the hostile corporate take-over, in 1987, of Viacom Inc., then a cable television company with some puny channels named MTV and Nickelodeon.  Investment bankers wanted Redstone to sell the channels to pay down debt. Redstone refused.

Now MTV and Nickelodeon are Viacom's financial engines.

“My father, he always thought I was taking too big of a risk on Viacom.  He said, 'You’re betting your life on Viacom.'  I told him that I wanted to,” Redstone told the group.  “Unfortunately, he never lived to see the success of Viacom.”

Viacom now is valued at $27 billion. (CBS, Redstone's other company, has a $22-billion market cap.)

“I saw that content was king; I coined that phrase decades ago,” Redstone told Milken and the group, which included CBS Chief Executive Leslie Moonves; Mel Karmazin, chief executive of Sirius XM Radio Inc. and former chief operating officer of Viacom; CBS board member Arnold Kopelson; movie producer Robert Evans; music producer Quincy Jones; and former CBS personality Mary Hart. 

Milken asked Redstone how he judged talent in the executive suite, although Milken didn’t mention the gallery of executives that Redstone, over the years, booted to the curb (including Karmazin in 2004). 

Milken did mention one piece of talent.  Tom Cruise, one of the most bankable stars ever for Viacom’s movie studio, Paramount Pictures, was dismissed by Redstone in 2006.  “His behavior was terrible; he was jumping on couches,” Redstone said. “Women hated him, a lot of people said they would never come to see another one of his movies. And he made $10 million on the Paramount lot for doing nothing!”

But a few years later, Redstone said, Cruise told him that he wanted to make pictures for Paramount again. Redstone said he said yes, but also told Cruise, “You won’t get the same deal.”

“Today he’s one of my best friends,” Redstone said. “I’ve been for dinner to the house that he shares with his wife, Katie. And today, 'Mission Impossible' is grossing more than any other 'Mission Impossible' before it.  It's on track to gross $700 million. People came back to the movies to see him.” 

These days, Redstone has trouble getting around so he doesn't get out as much as he used to.  But he said he watches a lot of golf on TV (“Tiger [Woods] will never make it again. He’s done,” Redstone predicted).  Redstone also oversees his tanks full of exotic fish in his Beverly Park home.  

“When you look at the fish, you relax.  When you look at the fish, your blood pressure goes down,” Redstone said, adding that despite being worth nearly $4.5 billion, he still has stress in his life.

Milken and Redstone often discuss healthy diets, Milken said. 

“I eat and drink every antioxidant known to man, and I also drink red wine every night," Redstone said "It, fortunately, prevents aging so it is of particular interest to me.”


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Photo: Sumner Redstone poses with his Hollywood Walk of Fame star. Credit: Paul Buck / EPA



Comcast profit jumps 30%, with mixed results at NBCUniversal

Comcast Corp.'s earnings jumped nearly 30% in its first quarter as more customers signed up for high-speed Internet service.  But the cable Goliath also showed strength in some an unexpected quarters: the long-lagging NBC broadcast unit and Universal Pictures, which released two hit movies, including "The Lorax."

For the quarter ended March 31, the Philadelphia-based company said its net income grew to $1.22 billion, or 45 cents per share, from $943 million, or 34 cents per share, from the year-earlier period.

Comcast generated consolidated revenue of $14.88 billion -- an increase of 23%.

"I'm really pleased with our start in 2012," Comcast Chief Executive Brian Roberts said in a Wednesday  morning conference call with analysts.  "Cable had another outstanding quarter.... We are starting to make some progress in broadcast."

NBCUniversal revenue was up 18% to $5.5 billion, in large part because the NBC broadcast network raked in $259 million in Super Bowl advertising revenue. (Excluding the Super Bowl, revenue at NBCUniversal was up 12.4%).

Roberts reminded analysts that NBCUniversal results would be volatile because of the hit-and-miss nature of movie box office and higher television programming costs. Comcast has been spending more on programming to try to lift the peacock network to profitability.

Operating cash flow at NBCUniversal was up 34.3% to $813 million compared to the first quarter of 2011.  In terms of revenue, NBCUniversal cable networks generated $2.1 billion in revenue versus $2 billion in the year-earlier period.  The NBC broadcast unit pulled in $1.85 billion in revenue (including the Super Bowl) compared to $1.35 billion in the year-earlier period. Film entertainment revenue swelled to $1.19 billion from $975 million in 2011. Theme parks generated $412 million, up from $390 million.

However, the company's operating cash flow margins were lower at cable networks due to higher programming and production costs, including those for NBA basketball. The broadcast unit posted an operating cash flow loss of $10 million, reflecting higher programming costs and higher marketing expenses to support the launch of mid-season shows, including "Smash."

"We're starting to make some progress but there is a long way to go," NBCUniversal Chief Executive Steve Burke told analysts. "And in film, we have a much stronger slate this year." Among Universal's upcoming film titles are the big budget action film "Battleship," the dark fairy tale "Snow White and the Huntsman," and a new iteration of the successful "Bourne" series.

Comcast is the nation's largest cable television and high-speed Internet provider. It holds a 51% controlling interest in NBCUniversal. 


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-- Meg James

Photo: Comcast Cable company trucks in Southern California / Credit:  Bob Chamberlin / Los Angeles Times.

Top Comcast executives take a pay cut in 2011


Comcast Corp.’s highest-paid executives — Chief Executive Brian Roberts and NBCUniversal Chief Executive Steve Burke — experienced compensation deflation last year.

Roberts’ pay package shrank 13.3% in 2011 to $26.9 million. That included a performance-based cash bonus of $5.5 million for the 52-year-old executive.

Meanwhile, Burke’s compensation dropped a whopping 32% to $23.7 million, which included a performance bonus of $6.7 million. The 53-year-old executive’s amount fell dramatically in 2011 as it was the first time in three years that he did not collect a signing bonus.

Burke, who took over management of NBCUniversal last year when Comcast acquired controlling interest in the company, received bonuses of about $10 million in both 2009 and 2010 for extending his contract.

The compensation, disclosed Friday in a proxy filed with the Securities and Exchange Commission, put the managers of the Philadelphia-based cable and entertainment giant in the middle rungs of corporate pay across big media conglomerates.

By comparison, CBS Corp. Chief Executive Leslie Moonves received a package valued at $69.9 million last year, Discovery Communications Chief Executive David Zaslav received $52.4 million; Viacom Chief Executive Philippe Dauman captured $43 million, Walt Disney Co. Chief Executive Robert Iger collected $31.4 million, and Time Warner Inc. Chief Executive Jeffrey Bewkes got $25.9 million. SteveBurkeNBCUniversalChief

Three years ago, Comcast’s top executives agreed to a four-year freeze in their base salary. Roberts’ base salary was $2.8 million; Burke’s was $2.24 million.

The top Comcast executives could have received fatter packages last year. The company achieved substantial growth in revenue and free cash flow, but its top executives elected to bring their performance base bonus calculations more in line with how their underlings are paid — and the Comcast board's compensation committee agreed.

In its proxy, Comcast said its operating management’s “cash bonuses are based primarily on business unit operating metrics rather than consolidated financial performance.”

Chief Financial Officer Michael J. Angelakis last year received a total package of $21.9 million, which was a 4% decline from his 2010 compensation. In contrast, Executive Vice President David L. Cohen accepted more stock and other bonuses which boosted his take 19% to $15.1 million.

Comcast Cable Communications Chief Executive Neil Smit collected $18.5 million in 2011, including a $3-million cash performance bonus. This was the first time that Comcast was required to disclose Smit’s earnings. Smit joined Comcast two years ago but he did not become a top corporate officer until last year when he was named chief executive officer of Comcast Cable.

And Ralph J. Roberts, the 92-year-old co-founder of the cable company, collected his customary $1-a-year salary.


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Top photo: Comcast Chief Executive Brian Roberts in 2007. Credit: George Widman / Associated Press.  Bottom right: NBCUniversal Chief Executive Steve Burke in 2010. Credit: Nati Harnik / Associated Press.

Universal Cable Productions signs deal with Gale Anne Hurd


NBCUniversal's cable television production studio is partnering with Gale Anne Hurd's Valhalla Entertainment with the hope that the prolific veteran film producer will generate hits for the Comcast Corp.-controlled media company.

Landing a producer of Hurd's stature is noteworthy for the cable studio.  Hurd has made such blockbuster movies as "Aliens," "Terminator 2," "The Incredible Hulk" and "The Abyss." Hurd's first stab at cable programming resulted in "The Walking Dead," AMC's juggernaut series, which Hurd produces with filmmaker Frank Darabont.  (Last month's season finale of "The Walking Dead" drew 9 million viewers, an extraordinary number for a cable program.) 

As part of the deal, announced Monday, Valhalla will develop and produce projects for NBCUniversal's cable channels, including USA Network and Syfy, and the struggling NBC broadcast network. The companies may also sell their co-produced programs outside the Comcast family to networks owned by other media giants.

The Valhalla Entertainment pact marks the third "pod deal" for Universal Cable Productions. (Unlike a first-look deal, where a producer can shop a show around, a pod arrangement is more comprehensive because the studio takes an ownership interest in all projects.) The company has similar deals with Tagline, which produces the hit "Psych" for USA Network, and Hypnotic, which produces the dramas “Covert Affairs” and “Suits” for USA as well as the comedy series “I Just Want My Pants Back” for MTV.

The agreement does not include Valhalla television shows already on the air or in the pipeline, such as  "The Walking Dead" and "Port Royal," an upcoming show for FX.

Universal Cable is managed by a team of development executives that includes Richard Rothstein, Chris Sanagustin and Maira Suro. The three oversee development for USA, Syfy and external networks, respectively.

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Photo: Producer Gale Anne Hurd with a zombie head in March at her Valhalla Entertainment offices in Los Angeles.  Hurd is an executive producer of the AMC series "The Walking Dead."  Credit:  Anne Cusack / Los Angeles Times.

Cable programming costs will continue to rise

Sports rights drive programming costs
While subscriber growth is slowing for cable television companies, the cost of content continues to rise.

According to a new report from Nomura Equity Research analysts, the money that distributors such as Comcast Corp. and Time Warner Cable shell out for programming rose 8.2% in 2011 and is likely to jump 8% in each of the next two years.

Although the typical cable household gets more than 100 channels these days, most of those channels are owned by a handful of companies including News Corp., Time Warner Inc., Comcast, Discovery Communications, Viacom and Walt Disney Co. Overall, cable and satellite companies coughed up $33.5 billion to content providers in 2011.

Walt Disney Co., parent of ESPN and Disney Channel, two of the most expensive cable channels, accounted for almost 25% of that $33.5 billion, according to the report. ESPN, of course, spends very large sums on sports rights, including the National Football League. 

Time Warner, parent of TNT, TBS, CNN and HBO, received 21% of the overall spending. Comcast, which owns USA, MSNBC and Bravo, accounted for 16%. News Corp., whose holdings include Fox News and FX, had a 14% slice of the pie. Combined, those four companies account for 75% of cable programming costs.

Cable programming isn't the only cost that is increasing. Broadcasters such as CBS, News Corp.'s Fox Broadcasting, Comcast's NBC and Disney's ABC are now getting fees from cable and satellite operators as well. Nomura said that in 2011, the big four broadcast networks took in almost $400 million in so-called retransmission consent fees, more than twice what they made in 2010. In 2012, the figure is expected to double again to $750 million. Nomura said Fox and CBS are the most aggressive among broadcasters.


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-- Joe Flint

Photo: San Francisco 49er players celebrate. Credit: Marcio Jose Sanchez/AP.

Media giants score legal victory against foes of bundling channels

Don't look for your cable company to let you pick what channels you want to get anytime soon.

A panel of judges for the U.S. 9th Circuit Court of Appeals in San Francisco sided with a dozen media giants including News Corp., Time Warner, DirecTV and Comcast in a class-action suit that was looking to do away with the practice of bundling multiple channels together and selling them as a package, a long-standing industry tradition.

Bundling is when programmers sells their channels in bulk to distributors. For example, Walt Disney Co.'s ESPN typically cuts deals with cable and satellite distributors for multiple channels. The distributor then sells the bundle as part of a package to consumers.

Many media watchdogs argue that bundling allows big media companies to get distribution for less popular channels in return for carrying the popular channels. A distributor can pay to carry just ESPN and none of its spinoffs. However, the cost is usually higher than if the distributor agrees to carry several ESPN channels. The consumer who might only want ESPN must pay to get the extra ESPN channels too. 

In affirming a U.S. District Court ruling in California, the 9th Circuit panel said that bundling is not a violation of antitrust laws. The plaintiffs -- a group of cable and satellite television subscribers -- argued that programmers abused their market power and harmed competition by requiring distributors to sell channels in prepackaged tiers rather than on an individual, or a la carte, basis.

The attorney for the plaintiffs, Maxwell Blecher of the Los Angeles law firm Blecher & Collins, said he will either seek a hearing in front of the full 9th Circuit or appeal to the Supreme Court.


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