NBC U’s weak results were relative bright spot amid the GE fiasco last week. Jeff Zucker’s unit posted 3% revenue and profit growth in Q1. But that was less than the 10% revenue and 5-10% profit increases GE had predicted in January.
Now GE says NBC will post 10% revenue and 5% profit increases in Q2. But we don’t have any reason to believe Jeff’s group will do that this time, either.
Why not? Because the ad recession looks like it’s finally hitting the company — and will likely bang up the rest of the big media conglomerates, too.
Local ad sales at NBC declined 11% in Q, and Goldman Sachs expects that trend to take a harder toll on CBS (CBS) when the company reports earnings in two weeks. Goldman believes there was a broad pullback in local advertising in Q1, led by car dealerships, and it’s not going to get better in Q2. The really bad news — Goldman is taking “continued deterioration as an early sign that pressure on the national ad market should soon follow.”
And it’s not just old media: NBC said the weakening economy was “impacting Internet ads.” Digital revenue was up 5% in the quarter, anemic given double-digit growth of the online ad market.
After seeing NBC’s struggles, Goldman is expecting CBS to turn in an even worse quarter then NBC: down 3% in revenue ($3.5 bn), up 1% in EBITDA ($642 m) and up 4% in earnings per share ($0.35). It should be noted that in EBITDA and EPS growth, Goldman is actually more bullish than the street consensus of $588 m EBITDA and $0.33 EPS.
As the NYTimes reported today, the CBS is facing challenges in all its businesses, including prime time where its about to lose its “most watched” crown. And CEO Les Moonves’ compensation is growing in reverse proportion to ad revenues.
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