Are kids wringing out SpongeBob?

November 10, 2011

Back in September, right before the quarter ended, Viacom trimmed  its advertising revenue outlook to high single digit growth from double digit growth. One of only a few media conglomerates to take that step–News Corp, Time Warner, and CBS were much more upbeat–the move prompted some concern among media watchers that advertisers were beginning to slash their budgets on macro-economic concerns.

But that wasn’t the case. It turns out the problem was Viacom specific. As the Sumner Redstone-controlled company disclosed during its fiscal fourth quarter results Thursday, domestic advertising revenue growth slowed in part because of a mid-September ratings plunge kids network Nickelodeon. Total domestic ad revenue across Viacom’s cable networks, which also includes MTV, VH1, and Comedy Central, for FQ4 was up 7 percent versus the third quarter’s climb of 12 percent.

What’s more is that Viacom CEO Philippe Dauman threw audience measurement company Nielsen Co under the bus on Thursday’s earnings call, saying the  ratings drop at Nickelodeon was “inexplicable.” He said Nielsen’s data did not match Viacom’s own set top box data for viewers. The company is currently in discussions with Nielsen– the dominant company that tracks TV ratings that determine ad rates — and the watchdog organization Media Ratings Council to resolve the situation.

Here’s Dauman on the call: “Let’s just say that we wouldn’t have had to have any conversatoin with either of them based on the set-top box data they are examining. That is the reason everybody believes there is an anomaly.”

Nielsen responded with this statement: “It is the longstanding policy of Nielsen not to comment on specific client business issues. As Viacom stated on their earnings call this morning, we have worked closely with Nickelodeon and the Media Ratings Council to conduct an exhaustive assessment of the methodoligical and market factors reflected in national TV ratings. To date, the review process confirms that our measurement methodology, operations and related reporting processes are working as expected.”

Battling with media companies over ratings data is unfamiliar territory for Nielsen. Broadly speaking, the company has been criticized by some media conglomerates that claim its methodology for tracking consumers’ viewing habits is outdated.  For instance, last November former NBC chief executive Jeff Zucker said Nielsen’s sample size was a problem, explaining that CNBC’s ratings fell after only three people were taken out of a 300-person Nielsen sample.

But, as it related to Nickelodeon, the problem may have nothing to do with Nielsen at all. Maybe it’s that children have turned against TVs. Hard as that is to imagine, that’s the takeaway from a note issued by Barclays Capital analyst Anthony DiClemente Thursday looking at a ratings rundown titled: “What are the kids watching these days?”

Not much apparently.  Based on Nielsen data, DiClemente wrote that ratings  for kids 2-11 were down 18 percent in the fourth quarter to date at Nickelodeon. Time Warner’s Cartoon Network notched the same, down 18 percent for the same demo and period.  The Disney Channel did better, up 7 percent in Q4 to date, though DiClemente mentions “the network posted just 2 percent growth” for the week ending Nov. 6.

(Photo of SpongeBob SquarePants from Reuters)

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