Discovery Communications CEO David Zaslav: Ad Market Remains 'Extremely Strong'

Analyst sees industry ad growth rate slip in 2011, but likes sector stocks

NEW YORK - The advertising market remains "extremely strong" and is even stronger than it was a month ago, Discovery Communications CEO David Zaslav said Thursday.

Speaking at a Morgan Stanley media investor conference in Barcelona, Spain, he said 2011 looks like a "very good" year if the market remains solid. From auto to financial services, all major ad categories are actively buying. "Everybody is in the market," Zaslav said. But he also cautioned that there is no clear visibility into the first quarter of next year yet.

With the end of the year approaching, industry observers have wondered how much steam the red-hot TV ad market will have left or how much it will slow down next year.

Zaslav's comments came on the same day as Barclays Capital analyst Anthony DiClemente in a report discussed ad and other takeaways from media companies' third-quarter earnings season.

"Cable network advertising growth in the quarter accelerated from 10.3% in the second quarter to 12.6% in the third quarter, a level not reached within the last few years, driven by the resilience of automotive and
financials ad spend," he said.

"While overall ad growth has certainly been impressive the last couple of quarters, we are modeling a deceleration for the industry due to stiffening year-ago comparisons and the possibility of foreign exchange headwinds," he said. DiClemente estimated cable network ad growth of 8.8% in the current quarter and 7.8% in 2011.

He concluded that sector stocks remain "attractive" relative to other consumer discretionary stocks at current prices, and the recent earnings season boosted investor confidence in key stocks. "Media continues to see upward earnings revisions as Viacom, Scripps Networks and CBS realized the greatest uptick in Street 2011 estimated earnings per share" after their respective earnings reports, DiClemente said.

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