The news hasn’t been good for some time for the US media and things are only going to get worse, if unimpressive results from three major groups in the first quarter reporting season are any guide.
Five companies are already going bust with the biggest, The Tribune Co showing $US13 billion in debts. The flow of results and the expectations for those about to report are for more damage, some of it will be fatal.
The internet and financial crunch wreaked havoc, now it’s the recession that is crunching cash flows and ad revenues.
Gannett, the biggest publisher, reported a 60% fall in first quarter earnings on a much smaller 18% fall in revenue, Media General, another newspaper group, reported a loss for the quarter and the giant TV and film business, NBC Universal revealed a 45% fall in earnings for the quarter on a 2% rise in revenue.
This week McClatchy and The New York Times Co will report sharp falls in profits or losses for the three months to March.
The following week CBS and its parent, Viacom report and News Corporation the week after, with Disney, Time Warner, and other groups also down to release results in the next 14 days.
NBC Universal’s results stood out: it’s in free to air TV, cable, film and recorded entertainment, such as DVDs. DVDs fell, extending the trend that emerged in the 4th quarter of 2008. That will be bad news for Time Warner, News and Disney, which have also seen film financing dry up.
US analysts are forecasting that Walt Disney Co, News Corp and Viacom Inc will post profit falls ranging from 35% to 50%.
Like other media companies, besides the slumping DVD sales, NBC Universal is suffering from a severely depressed local TV market and difficult network television ratings. (Free to air viewing is down sharply this year, in some cases 10%-15% for some programs and some network timeslots). The company’s cable businesses, which account for 60% of revenues, had a strong quarter.
General Electric Co owns 80% of NBC Universal; France’s Vivendi the rest. (GE reported a 30% overall slump in first quarter earnings).
US media reported that a memo to staff Friday from NBN Universal CEO, Jeff Zucker, said profit would have been down a more modest 15% if not for several one-off events, among them a write-down of its stake in local TV broadcaster ION Media, a smaller-than-usual number of theatrical and DVD releases, and the fees it paid to the National Football League for the broadcast of this year’s Super Bowl. (Those fees should have been offset against profits on ad sales at $US3 million for each 30 second ad.
Zucker also acknowledged that “a weaker advertising market and slower consumer demand” have hurt the business, which includes theme parks, a film studio and digital assets.
US advertising is forecast to fall by around 8% this year, with Network TV down 5%-10%, depending on the network and the timeslot.
NBC Universal’s cable networks Bravo, USA, CNBC, MSNBC, and Oxygen all posted record quarterly results and accounted for around 60% of revenue, but that wasn’t enough to offset the downturn in ad revenues and sales income from film and the fall in DVD sales in the quarter.
For publisher, Media General it was another quarterly loss and lower revenues.
The company said its first-quarter net loss was $US21.3 million, compared with a loss of $US20.3 million, a year earlier. Revenue dropped 18% to $US159.5 million.
Media General publishes 22 daily newspapers, including The Tampa Tribune, Richmond Times-Dispatch, and Winston-Salem Journal; and community newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina; plus more than 250 weekly newspapers and other targeted publications. The company owns and operates 19 network-affiliated television stations
Publishing revenue fell on a 25% Lower automotive ad spending drove the 19% drop in local TV station revenues. (That’s bad news for News Corp whose local TV stations suffered a sharp fall in revenues in the December quarter and half year). Media General cut costs in the first quarter by axing 300 jobs and suspending its dividend.
Classified ad revenue fell, with employment classifieds leading the way with a 67% fall. The drop for Gannett in this area was around 60% in the quarter. Along with real estate and cars, classifieds are the black hole into which US newspapers are disappearing, thanks to the internet and the recession.
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