Three months ago, when Big Media CEOs wrapped up their 2Q earnings, they were still relentlessly upbeat about the business. Any worries about the economy? Not then. But the messages they delivered over the past few weeks, as they discussed 3Q, were different. Although they’re still optimistic — remember, they’re paid to be salesmen — now and then you could hear expressions of concern about where things are headed. It stood out when Viacom CEO Philippe Dauman noted that “ad sales growth will face some headwinds.” Other CEOs who are known for speaking bluntly warned that other shocks may bedevil the business. For example, Dish Network Chairman Charlie Ergen said that his satellite company — and others in pay TV — have to fight harder against rising programming costs because “there’s a limit to the price increases that could be passed on to consumers.” Time Warner Cable CEO Glenn Britt warned that premium channels such as HBO, Showtime and Starz “are clearly impacted by the economy as consumers try to cut back.” Either they’re genuinely worried, or they want a scapegoat to blame for things that are going bad, or may soon do so. Whatever the case, we can expect to hear a lot more about the economy when it’s time for the post-mortem on the all-important 4Q earnings.
As for industry performance matters, parents of movie studios had their usual mixed results to brag about or explain away: Time Warner benefitted from Harry Potter And The Deathly Hallows Part 2. Viacom was up on Transformers: Dark Of The Moon. And News Corp beat its chest about Rise Of The Planet Of The Apes and X-Men: First Class. But Disney’s Cars 2 was no match for last year’s Toy Story 3. Comcast’s Universal Pictures had nothing to compare to last year’s Despicable Me. Lionsgate suffered from Conan The Barbarian and Warrior. And DreamWorks Animation’s Kung Fu Panda 2 didn’t contribute as much in the quarter as Shrek Forever After did in the same period last year.
Over at the TV networks, Comcast’s NBC underperformed the Street’s already modest expectations. Execs at almost all the companies were eager to talk about the cash they expect to collect soon from political ads — as well as their favorite new ATM machines: retransmission consent deals and digital streamers including Amazon, Hulu, and Netflix. Speaking of Netflix, CEO Reed Hastings once again tried to reassure investors that he’s focused on “building back our reputation and brand strength” after his decision in July to slap a 60% price increase on customers who wanted to continue to rent DVDs and stream videos. In 3Q Netflix lost 57.7% of its market value and 800,000 subscribers. And since that customer loss was bigger than projected, Netflix shares continued to fall — they’re now down 67.3% since July 1.
Here are some other themes from the latest earnings reports:
Ad sales: They’s good, but for how long? Most television networks report that scatter prices are comfortably above the upfront market from this past summer. CBS chief Les Moonves says prices in 4Q are up by “mid-teens” on a percentage basis, while Discovery says it sees least high single digit percentages. But Disney’s Bob Iger noted that scatter prices have “slowed slightly these last few weeks.” Kurt Hall of National CineMedia — the leading seller of ads in movie theaters — was far more direct when he spoke to analysts after ratcheting down his company’s financial forecasts. “I’m sure that the broadcast and cable guys are sitting there now counting their lucky stars they got their upfront done before August,” he told analysts. “There’s a lot of uncertainty.”
Pay TV: Little evidence in 3Q for the argument that masses of cable, satellite and telco TV subscribers are ready to cut the pay TV cord. Traditional pay TV companies collectively lost 31,000 subs — an improvement from the 464,000 lost in 2Q — Wells Fargo analyst Marci Ryvicker calculates. But pay TV has become a zero-sum game, Bernstein Research analyst Craig Moffett notes, and as “video programming margins are relentlessly compressing, subscriber growth is critical to the story.” What’s more, there was a striking slowdown in sales of cable-provided phone services — possibly because many consumers are dropping landlines and relying on cell phones. That has some analysts wondering whether the industry can continue to drum up business by offering discounted Triple Play packages for TV, broadband, and phone.
Stock Buybacks: They were more popular in 3Q than they were in 2Q. Sumner Redstone’s companies, Viacom and CBS, increased their authorizations. Time Warner, Comcast, and Disney accelerated their buys during the quarter while News Corp and Comcast kept on pace with their previous plans. This is what you do when you can’t persuade stockholders you have smarter ways to invest their cash.
Movies: Not as much talk about the merits or liabilities of 3D this time around as theater owners mostly exceeded expectations: Potter and Transformers 3 helped to boost attendance in 3Q with people paying higher prices for tickets and popcorn. Cinemark called 3Q a record quarter. And exhibitors are optimistic about the next six weeks. Regal CEO Amy Miles noted that “last year’s holiday box office season was disappointing,” which provides “a relatively easy comparison” for 4Q. Most said that they’d be glad to talk to studios about plans for premium VOD or to change the payment schemes for 3D glasses — as long as theaters don’t have to suffer. But RealD, the company that supplies most of the glasses as well as other 3D technology, is feeling some pain. Its market value declined 12.2% since it announced that Samsung pulled out of deal to make screens for 3D televisions using RealD’s technology.

Interesting how you never hear of these big media CEOs and other members of upper management taking pay cuts to help their company’s bottom line.
You never hear of reductions in management. It’s always the worker bees that get laid off and take pay cuts.
There’s your scapegoat.
Philippe Dauman just paid himself $85M – more than any other CEO on the NYSE – and six months later VIA got delisted to the NASDAQ. These guys need to go. They take credit (and insane bonuses) for success, and blame their staffs and the market in failure. $85M paycheck to insufficient capital requirements to stay on the NYSE in six short months. Philippe Dauman never created a second of content in his life. Nobody has ever bought a movie ticket or tuned into a television show because Philippe Dauman was involved, but somehow he makes more money in failure than any writer, director, producer does in success. No wonder they delisted VIA – it is just a bad investment all the way around – starting at the top.
Stock or salary?
It’s a way to give the employees a heads up that there Christmas bonus will be non-exisistant or smaller then anticipated. The little man gets hosed by the man.
Merry Christmas.
Terrence – PYE!
The big takeaway from this is that running a media company has never been more difficult and those that do it well are well paid. Dauman’s compensation last year included stock incentives that kick in over a lot of years and he gets that money only if the stock goes up for all Viacom shareholders. If the stock doesn’t go up, he gets a lot less. You may not like it, but at least shareholders have a chance to make money too. There are lots of folks in the entertainment business raking in big bucks behind the scenes taking outrageous fees from multimillion dollar movies that are DOA at the box office. Fact is Viacom made a lot of money for shareholders this year, with revenues and profits up across the board. The company moved to the NASDAQ because they got a better deal there that at the New York Stock Exchange, another smart move. It’s populat to bash CEOs but it’s important to get the full picture and all the facts.
Veritas,
Philippe took the CEO job in 2006. Since that time the stock has NOT made a lot of money for shareholders. It was trading at $44 and paying 43 cents in quarterly dividends. The stock has not split nor increased its dividend in the five years I’ve owned this dog. My McDonalds stock cost me about $44 per share when I bought it in 2006 – but that stock has split several times and paid $1.26 per quarter. Its trading a little shy of $100 per share today. Meanwhile Philippe has paid himself $161 Million since he took the CEO gig. Jim Skinner has paid himself $42Million. Philippe’s performance isn’t four times better than Jim Skinner’s – in fact – for stockholders like myself, Jim has done about an 82 times better job that Philippe. But that is what compensation is supposed to be about isn’t it Veritas? Rewarding good performance? Meritocracy? Right?
Paul
It’s a mighty thin pancake that doesn’t have two sides. Being a big media CEO, er succeeding as a big media CEO is a hefty feat.
How much is too much? That’s up to shareholders voting with their wallets not chagrined creators and Congressional class warfare artists with no skin in the game.