SNL Kagan Sees 2011-2015 Basic Cable Networks Compound Annual Revenue Growth of 8%

1:44 PM PST 11/21/2011 by Georg Szalai

In an annual report, the research firm says the sector will remain healthy as revenue momentum will slightly slow from 8.5 percent in the previous five years as higher ad growth will be offset by lower affiliate fee increases.

NEW YORK - Full-year 2011 advertising revenue for basic cable channels will grow 14 percent despite continued economic weakness, but slow to around 10 percent next year and the 8 percent to 9 percent range thereafter, according to SNL Kagan's Economics of Basic Cable Networks Report.

This will mean a compound annual growth rate of 8.9 percent for the 2011-2015 timeframe, still well ahead of the 5.9 percent recorded for the 2006-2010 period, according to the research firm. That will boost net advertising revenue from $19.0 billion in 2010 to $21.6 billion this year and $30.4 billion in 2015, it forecasts.

That will also mean that ad growth will outpace affiliate fee revenue gains over the five-year period, reversing a trend of the past five years. 

SNL Kagan foresees affiliate fee revenue growth of 7.5 percent on a compound basis for the 2011-2015 period, below the 11.2 percent average growth during the previous five-year period. That would grow affiliate revenue from $24.9 billion last year to $26.8 billion this year and $35.8 billion in 2015, it projects.

Overall, total basic cable networks sector revenue will grow 8.0 percent on average per year over the 2011-2015 period, down from 8.5 percent in the previous five-year period, cording to SNL Kagan. Revenue will go from $45.2 billion in 2010 to  $49.9 billion in 2011 and $67.9 billion in 2015, according to its projections.

In terms of basic cable networks profitability, the research firm expects cash flow, which grew 12.3 percent on a compound annual rate for 2006-2010 to rise 9.9 percent on an average basis for the 2011-2015 time frame. That would mean an improvement from $18.5 billion in 2010 to $20.9 billion in 2011 and $30.5 billion in 2015.

Total expenses rose 6.2 percent on a compound annual growth rate for the 2006-2010 period, including a 8.6 percent gain in programming expenses. For 2011-2015, SNL Kagan estimates a 6.7 percent increase in total expenses, including a 7.5 percent increase in programming expenses.

Wall Street analysts have generally been bullish on cable networks owners despite economic and related advertising concerns.

SNL Kagan's Economics of Basic Cable Networks Report had this to say on the topic: "Cable network equities have been volatile recently as some investors ponder what impact the still-weak economy will have, but this segment continues to see strong performance."
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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