Netflix: The New Arch-Frenemy
The Albanian Army is coming everyone, watch out!
We’re only into week 1 of big media companies reporting their quarterly earnings and the most prominent name hasn’t been CBS Corp, Time Warner Inc, Comcast Corp, and Viacom — instead it’s all been about Netflix.
Pretty much on each of these companies’ conference calls, the $4 billion company from Los Gatos, California was a key reason for a boon to the bottom line by supplying ’found money’ by digital licensing of shows that would have been gathering dust on a shelf somewhere in Hollywood. But also on the calls for several of the same companies, Netflix was seen by analysts as a threat to their future. Let’s not forget the four who reported this week have combined market value of over $160 billion.
At CBS on Tuesday, which most people see as a broadcast and billboards advertising company, the first quarter was given a nice bump from its licensing of old CBS shows like”‘Cheers” but also by newer cable shows like Showtime’s “‘Dexter” and “Sleeper Cell”. Here’s the ever ebullient CBS CEO Les Moonves telling analysts on Tuesday how great Netflix and other copycats are:
“Content is forever and quality content never goes out of style. Nowhere is this more evident than the way we monetize our content digitally. In addition to the deals we struck with Netflix and Amazon, other online video distributors are looking to license our library content. These deals are having a big impact on our financial results, adding meaningful, very high margin dollars to our bottom line”
In Super Bowl streaming deal, Verizon scores again
What a delightful week this is turning out to be for Verizon. First, archrival AT&T decides it will ditch its $39 billion bid for T-Mobile USA (as if they weren’t grinning madly in the halls of Verizon’s Art Deco building down on West Street) and then they get a piece of this NBC deal to stream the Super Bowl. No doubt, in the greater scheme of things the AT&T news trumps the streaming deal — but every little thing helps in the crazy competitive telecoms world.
Here’s the upshot: For the first time NFL postseason games — including the Super Bowl — will be streamed live online over NFL.com and NBCSports.com and over mobile devices through an app supplied by Verizon. This is NBC’s deal; Fox tells us they have “no similar plans” while we’re CBS declined to comment on whether they would do a streaming deal..
The advantage for Verizon is clear: It’s just one more differentiator. (Verizon has really been on a roll lately. Beyond the events mentioned above, they swooped in to buy a ton of cable spectrum for $3.6 billion and made headlines with their plans to take on Netflix with a streaming service).
For NBC, the thinking is they can add an online audience to their already huge TV football audience. Joe Football Fan will watch the Super Bowl and all of its $3 million-plus commercials on the big TV screen at the same time he is watching the streaming coverage on his phone or PC, which will include a bunch of extra stuff such as additional camera angles, sideline updates and in-game analysis. In other words, it will be complementary.
At least that’s the plan. And it’s likely to work out just fine for NBC. When it comes to the Super Bowl, football fans crave all the information they can get, and having access to the game on your mobile phone while your sitting in a loud, crowded living room party would, frankly, be helpful.
There is a risk, of course. Perhaps this is just one more step toward cord-cutting, or allowing viewers to watch their favorite shows without the cost of subscribing to a cable distributor. If the NFL — the NFL! — is available in real time online, then can every third-rate sitcom be far behind?
Comcast, which controls NBC, has obviously concluded the risk is very small. They’ve been streaming games on Sunday nights and, as the Associated Press reports, their broadcasts haven’t been hurt.
Karmazin: I’d have sold Viacom but for Sumner
Sirius XM Satellite Radio chief Mel Karmazin on Tuesday stopped by the annual Reuters Global Media Summit to talk about his company, its future and to occasionally go down memory lane on a range of what if’s.
The 68-year old acknowledged that after roughly 50 years in the business he finally realizes that he’s not a good number two. He also proudly noted that he has no aversion to selling a company he leads if the right offer comes along. His track record backs him up on that claim. Karmazin sold Infinity Broadcasting to CBS in 1997, and then CBS to Viacom in 2000, creating enormous wealth for his shareholders in the process.
But there’s one deal Karmazin seemed to regret not having a chance to get done–selling Viacom. He admitted that given the opportunity and presented with the right price he would have sold Viacom when he was in charge. But Viacom’s 88-year old legendary leader Sumner Redstone, who has majority control over both that company and CBS, stayed at Viacom longer than expected. Indeed, Redstone still serves as Viacom’s chairman, outlasting Karmazin, who decamped to SiriusXM after three years of constant clashes with the octogenarian.
“I would have sold Viacom if Sumner wasn’t around,” Karmazin noted candidly. He then smiled wide before adding, “If he went out to lunch I would have sold it.”
At CBS Sports, the good times are rolling
Many of us are looking forward to Saturday night’s prime-time match-up between Louisiana State and Alabama, the top two teams in college football. For a few hours, we get to set aside the craziness of conference realignment, forget about our own dismal teams (Boston College, this means you) and watch a good old-fashioned brawl between two storied programs.
But nobody may be as pumped up about Saturday’s game as Les Moonves, the CBS Corp Chief Executive who, it must be said, gets pumped up about a lot of stuff (ask him about NCIS sometime). Who can blame him — CBS Sports is bound to draw a blockbuster audience for the Southeastern Conference showdown.
“This weekend on our air we essentially have this year’s college football championship when number one LSU plays number two Alabama in prime time,” he said yesterday on an earnings conference call. “You don’t have to wait for the BCS in January this year to find out who the best team in the country is.”
He then added, “So our long-term deal with the SEC is paying off now and will continue to do so until 2023. This deal is looking better all the time as the SEC has clearly become the dominant conference in college football.”
It will be interesting to see just what sort of audience the game draws. Brad Adgate, of Horizon Media, told me today that he wouldn’t be surprised if more than 12 million viewers tuned in to CBS. He notes that last month’s game between Alabama and Florida — a good match-up, but hardly as good as Saturday’s — pulled in 8 million viewers for CBS.
“This will be big,” he said.
Advertising weak? Quit worrying so much already
Viacom Inc’s not sweating it, Time Warner Inc. isn’t all that concerned. Why, CBS Corp and Discovery Communications Inc. are cool as cucumbers. Disney certainly sounds confident, as does Scripps Networks Interactive.
So why are investors and analysts — those Nervous Nellies of the financial world — so worried about the advertising market? Besides, you know, the fact that the stock market is getting smacked around, the job picture is just ridiculous, and the U.S. housing market is a wreck. Besides Europe’s debt crisis, which seems to have no resolution in sight. Besides the memories of 2009, when U.S. advertising spending dropped by 16 percent to $163 billion.
It may simply be that advertisers haven’t yet made the decision the cut budgets. But listening to all the top media executives at the Goldman Sachs Communicopia Conference this week left one with the impression that they are feeling pretty upbeat about advertising — and don’t expect any cuts in the near future.
Today, the final day of the conference, Viacom CEO Philippe Dauman described ad sales as “strong” and predicted they would be up by just under 10 percent this quarter. Time Warner CEO Jeff Bewkes was a bit more restrained, but still said ad sales are holding up and actually “pretty strong” at its cable networks.
And it wasn’t just them. Check it out.
- CBS CEO Les Moonves: “I know the world wants us to say, ‘Gee, the economy is down and our advertising is down.’ That’s just not the case. The advertising climate is very strong.”
- Walt Disney CFO Jay Rasulo: “The advertising space, I would say that what we’ve seen is consistent with what you heard in the conferences last week and what you’ve heard from people earlier this week. On the national level, still directionally pretty strong; locally, a little weaker.”
- Discovery CEO David Zaslav: “The advertising market remains very strong, and it’s been strong now for a year and a half. We haven’t seen any slowdown. We’ve seen it continue around the world. Now there clearly is a disconnect between what the economy is doing and what we are seeing on the advertising side, but we have not seen any slowdown. “
- Scripps Networks CFO Joe NeCastro: “If anything, people are looking around wondering why we’re really so nervous and that they get suspicious but nobody has changed their behavior in any meaningful way.”
Truth be told, New York Times CEO Janet Robinson was about the only wet blanket. Amid all the fun, Robinson had the nerve to warn that advertising revenue would drop by a larger-than-expected 8 percent this quarter, hurt by a pullback in real estate, help wanted and national auto ads. (To be fair Bewkes also warned of print ads being “a little softer”).
File under acceptance: CBS knows it must pay up for the NFL
This time of year, it seems everybody loves football. The players, the fans, and, of course, the TV executives. And what’s not to like about football if you’re running a TV network, provided you have a deal with the NFL? Check it out, a total of 107 million viewers tuned into games between Thursday and Sunday on CBS, ESPN, Fox and NBC.
So it should come as no surprise that CBS Chief Executive Les Moonves, while speaking at today’s Bank of America conference, said he intended to renew the contract with the NFL when it expires in three years. “No surprise there,” he said. Indeed. The bigger question is what will CBS end up paying? Just last week, ESPN signed a new contract with the NFL at $1.9 billion a year. Repeat: $1.9 billion. That is about 73 percent more than ESPN previously paid the NFL.
As The New York Post’s Claire Atkinson points out in a story today, the ESPN deal has come under some heavy fire, particularly from the pay-TV industry, worried that it’s going to jack up rates.
“ESPN is a different animal,” Moonves said at today’s conference. “It’s really apples and oranges. There are a lot of other things involved than just the games. There’s a lot of content, and ESPN can maximize it. We have three years left on our NFL deal. We intend to keep the NFL, no surprise there. I’m sure there will be an increase — I hope it’s not the increase that they paid.”
Other comments from the always-upbeat Moonves:
- Advertising is fine at CBS. Done worry. There’s no slowdown
- CBS is not about to go crazy on big, blockbuster movies. Keeping it small, keeping it real
- Not joining Hulu was a totally fantastic decision
- Forget all that negative stuff you hear about CNET. “We’re pleased with the way it’s going”
- Political advertising is going to rock, even if the politics are ugly business
- More digital distribution deals — like the Netflix one — could be considered, “but with caution”
- Outdoor — ummm, I’m pretty sure he said something about that
- Publishing is more profitable than a year ago, even with revenue under pressure
When it comes to NFL, TV executives put on brave face
Shrewd? Prescient? Delusional? Tough to know, but top TV executives this week all seemed relatively confident — even off the record — when asked about the chances that NFL games would be played this fall.
The background, of course, is that NFL team owners and players are at odds over salary caps and other issues, raising the possibility of a lockout and the cancellation of some or all of the 2011 football season. Very bad news, if you’re a fan or a network executive.
As Yinka Adegoke and Liana Baker wrote in a piece this spring, “It is difficult to overstate the importance of the NFL to the revenue and profits of broadcasters like CBS Corp, Walt Disney’s ESPN, Comcast Corp’s NBC and News Corp’s Fox.”
Consider this: The broadcast and cable networks that share the NFL rights sell about $3 billion in advertising time for games each season. That’s $3 billion that’s up for grabs.
As TV executives made the rounds this week to introduce their 2011-12 prime-time schedules, they couldn’t escape the 800-pound linebacker in the room. It’s noteworthy that all of them — even if they were privately sweating — put on a brave face. Here’s a taste… “They’re going to play,” said John Skipper, who oversees content for ESPN. “I don’t know when they are going to play, but eventually they will play, and we will show it on Monday nights.”
If you really want brass, check out the what Entertainment Chairman Bob Greenblatt had to say over at NBC, which counts on the NFL for blockbuster ratings every Sunday night. “We’ve obviously pretty close to what’s going on with this situation. We’re feeling pretty optimistic that football will be there. Worst case scenarios is we might have delay of games for a few weeks, in which case we’ve got a contingency plan to produce several high quality live event reality type shows that will fill out Sunday. But we’re feeling pretty good about where we’re going to be with the NFL.”
And Fox? A bit more wishy-washy, but hardly any signs of panic. “I think they’re planning for there to be an NFL season and at the same time working on contingencies if there’s not,” said Fox Networks Entertainment Chairman Peter Rice.
CBS: Get used to growth
CBS put on a big show in yesterday’s quarterly report, blowing out estimates on both profit and revenue. On the call that followed, Sumner Redstone called Les Moonves a “genius,” and Moonves called broadcast TV “the best game in town.”
Here are some notes from last night’s call:
- CBS, which said it would double its dividend, also plans to repurchase $250 million in stock this quarter. A nice bonus for shareholders who have already seen the stock rise by about 35 percent this year.
- Scatter rates, or prices for last-minute commercial buys, are up more than 40 percent in some cases for CBS. That’s a stunning number. Given those sorts of prices, Moonves is talking about “solid” double digit increases in upfront ad market next month.
- CBS is putting together six or seven fewer pilots than normal this year, showing that it’s pretty happy with its schedule right now (So far this season, CBS has declined the least of the big four broadcast networks in total household audience)
- Basically, investors and analysts should get used to these sorts of results, CBS suggested. Moonves said he was “confident” the first quarter’s performance would be “sustainable.”
GlobalMedia-ABC News in talks with Bloomberg
The news divisions at the big networks have been in a world of hurt lately as advertisers seek out younger consumers and viewers. This has lead to big cutbacks in staffing and resources over the years as the networks strive to keep profit margins from deteroirating even further.
ABC is certainly no expectation and has experienced managment upheaval when ABC News president David Westin announced in September his departure partly due to the financial situation and the pressure to increase profit margins.
Speculation has persisted that ABC News parent company, Walt Disney, has been seeking to untie itself from the division– rumors that similary dog CBS.
Anne Sweeney, president of Disney/ABC Television Group, flatly denied that the company was looking to offload the news or TV divisions but also confirmed that ABC News has been in talks with Bloomberg in forming a partnership. “We’ve had a lot of conversatoins with Bloomberg over the past couple of years,” she said during Reuters Media Global Summit.
Sweeney also said they are currently searching for Westin’s replacement though she was coy on when and who that might be. “We certainly have a lot of talent in ABC,” she said.
