Citibank Says It's 'Flummoxed' By Ratings Collapse In Cable TV

Citibank entertainment media analyst Jason B. Bazinet and his team wrote in a note to investors today that they are baffled by the audience ratings decline they’re seeing in cable TV.

Citi downgraded  CBS, Disney, Discovery, News Corp and Scripps from “Buy” to “Neutral” in the note after concluding that the ratings falloff was accompanied by a similar decline in the growth of ad dollars being spent on cable.

Citi left Time Warner and Viacom as “Buys.”

Cable continues to grow revenues, up  8 per cent (compound annual growth rate) since 2008, on Citi’s numbers. That’s more than the media sector as a whole, which only grew 2 per cent.

Audience ratings, however, are in a tailspin:

citi cable tv ratings

Citi cited a combination of Netflix, warmer weather, job gains, lack of hit shows, and faulty Nielsen measurement as possible culprits. Bazinet et al then concluded:

…while we’ve tried to quantify these sources, the bottom line is that we can’t explain the entire ratings shortfall. We are flummoxed.

Here’s one possible solution: People aren’t watching cable anymore because they’re using their cable service to play on the internet instead. I’ve argued for month now that the TV business as a whole is now sliding down the same slope that ruined the newspaper business: People abandoning old, expensive media for cheap, new web media.

This chart compares growth in ad dollars spent on cable vs. total ad growth. The black line in the middle represents the extra growth cable enjoyed above background growth in ad dollars generally. Cable's superior performance just came to an end.

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