Bigger Problem: Nickelodeon or MTV?

6:00 AM PST 10/16/2012 by Paul Bond

Viacom's two unruly children draw analyst ire, but one has far larger issues.

Viacom has been on the hot seat this year due to declining ratings at Nickelodeon, with fallout including the recent departures of acquisitions executive Paul Ward, programming exec Pete Danielsen and animation chief Brown Johnson. But now the heat is on MTV as well, courtesy of a lengthy Oct. 10 report from Wall Street analyst Todd Juenger of Bernstein Research, who contends that, while Nick's ratings have "arguably bottomed out," MTV's "will be down double digits across the next four quarters."

His forecast is based on megahit Jersey Shore ending after the fourth quarter and the fact that Viacom has funneled much of its development money to Nick, leaving MTV to rely on such shows as Ridiculousness, Awkward and Teen Wolf, which, he says, have "not grabbed pop culture attention." And the probability of success for new shows like The Inbetweeners, Underemployed and Catfish, he adds, is "pretty low."

Juenger's thesis is not beyond scrutiny, especially because the trend in recent years has been in MTV's favor. While MTV has grown its advertising 9 percent in the past six years to an estimated $940 million in 2012, Nick's ad sales have shrunk 3 percent in the same time frame to an estimated $995 million, according to SNL Kagan. (Viacom does not disclose such figures.) Still, when accounting for affiliate sales and "other" revenue, Nick will earn about $2.1 billion overall in 2012 -- about 22 percent of the $9.2 billion in sales for Viacom's entire cable TV unit this year. "It's huge," says Steve Birenberg of Northlake Capital Markets. "That's why its underperformance has been so devastating for Viacom."

MTV should post just under $1.5 billion this year, says SNL Kagan, so a slowdown there would be less meaningful than at Nick. But SNL Kagan still predicts growth at MTV of about 14 percent between 2012 and 2015. And Brian Wieser of Pivotal Research Group told clients Oct. 12 that the worries are overblown. "While no network wants to lose viewership," he wrote, "it's also worth noting that Jersey Shore is relatively unimportant from an advertising perspective: Most of the largest brands have always sought to keep their advertising out of Jersey Shore because of content concerns."

So while Juenger took the spotlight off Nick for a moment, the network and looming problems at Paramount (Viacom's film unit was down 10 percent in revenue and off 17 percent in operating income in the first nine months of 2012) are the potential problems. "Frankly, MTV may be under some pressure," says Tony Wible of Janney Capital Markets, "but there are several Nickelodeon channels down double digits in ratings. They really have an issue."

BY THE NUMBERS:

  • 22%: Share of Viacom's cable revenue from Nick in 2012
  • $995M: Nick ad revenue in 2012, down 3 percent from six years ago
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