Cable TV Advertising Market Recovers Strong in 2010
The networks ad revenues grew 9.4% last year, according to a report by industry analyst SNL Kagan.
The cable TV advertising market “saw a remarkable rebound in 2010,” after a “frightening two years,” according to industry analyst SNL Kagan, which has published an Industry Whitepaper called “Cable networks weather economic storm, positioned to remain strong.”
Cable networks ad revenues grew 9.4% last year, and despite the recession have grown their ad revenue at a 5.9% clip over the past five years, according to the report by senior analyst Derek Baine and managing editor Luke Meade.
“The long-term growth story is even more phenomenal,” Kagan says in the white paper, which adds that cable networks have grown ad revenue at an average of 13.2% per year over the past 20 years.
Ad revenue did decline 0.9% in 2009, when the global economic downturn was in full force, after a slight increase in 2008. But the market rebounded quickly, and Kagan is forecasting double digit gains for this year.
They project full year ad revenue growth for cable of 14% in 2011, dropping to about 10% in 2012 and running in the 8% to 9% range in the years after that.
In 2010, per the report, there were 30 cable networks that had cash flow margins of 50% or more. By 2015, they predict that will almost double to 58, with another 61 having margins in the 40% to 50% range.
“Despite turbulence in the market and uncertainty about the economic recovery,” says the white paper, “ad buyers are coming back to cable networks in droves.”
The Kagan report credits the 2007 writer’s strike with boosting cable networks. It says the dearth of new programming in that period caused viewers to switch to cable to find new things to watch. Some of those viewers were lost to broadcast permanently. “In 2008, cable network ad sales outperformed broadcast networks ad sales for the first time,” says the report, and since then there has been no looking back.”
According to Kagan, in 2010 broadcast networks sold $19.1 billion in gross ad revenue, which was over $3 billion less than the $22.3 billion made by cable networks.
"We expect this gap to widen going forward as broadcast ad sales show little growth on average,” says the report, “and we expect a continuation of the pattern of even years being better for broadcast than odd years due to the impact of elections and the Olympics.”
The report says cable networks have also benefited from having a dual revenue stream of ad sales and affiliate fees. Broadcasters are just starting to get a second stream of revenue from retransmission but Kagan says it will still not come close to the $24.9 billion in license fees that cable networks were able to negotiate.