Entertainment Industry

Category: Nicktoons

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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 -- Meg James

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

FCC looking at Nicktoons cartoon 'Zevo-3' for possible regulatory violations

A new cartoon that Viacom's kids cable channel Nicktoons is making is being probed by the Federal Communications Commission for potential violations of the Children's Television Act.

Although the show -- "Zevo-3" -- is not set to premiere until next month, it has already been blasted by the Campaign for a Commercial-Free Childhood, a media watchdog group that often raises concerns about over-commercialization of kids TV. The cartoon characters of "Zevo-3" were initially seen in specially made comic books used to market Skechers USA Inc.'s children's shoes and were created by Skechers Entertainment.

Two weeks ago, the Campaign for a Commercial-Free Childhood filed a complaint about "Zevo-3" with the FCC that said the show violates FCC regulations because it was made by Skechers Entertainment and its characters are known primarily to kids through campaigns to sell shoes. Nicktoons, a sister channel of Nickelodeon, is available in about 60 million homes.

Under the FCC's rules regarding children's programming, not only is there a limit on the number of commercials allowed to air in shows aimed at kids age 12 and under, there are also rules regarding product placement and advertisements for products within shows that feature the same products. 

In its complaint, the Campaign for a Commercial-Free Childhood argued that the characters in "Zevo-3" are commercial logos and thus the show "must be considered a promotion for Skecher shoes."

The FCC said it would seek comments on "Zevo-3." That is usually the first step toward a further investigation and, if the agency found Nickelodeon had violated its regulations, a potential fine. However, just because the FCC seeks comments on a complaint, that does not mean it will ultimately decide to investigate further.

If the FCC were to issue a fine, the distributors that carried the show would be on the hook, not Nickelodeon. That is also how it works with the FCC's indecency rules.

A Nickelodeon spokesman said, "As we previously stated, we do not believe that the show is a program-length commercial, nor do we agree that its transmission would violate the Children's Television Act or any of the Commission's rules or policies."

-- Joe Flint

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