NEW YORK – A number of major U.S. media companies are striving to become less dependent on advertising revenue, a move described as “a smart decision” by SNL Kagan.
According to a recent article by the American research firm, a review of June quarter financial results indicates that the likes of CBS Corp and Walt Disney are consciously cultivating other sources of revenue.
Revenues at CBS Corp.'s entertainment segment — the company's largest segment, which includes the CBS broadcast network, CBS Television Studios, CBS Global Distribution Group, CBS Films and CBS Interactive — fell to $1.84 billion from $2.01 billion in the prior-year period. The company attributed the decline both to lower television licensing revenues from the timing of sales and to lower advertising revenues during the quarter, reflecting a softness in the advertising marketplace and the absence of the NCAA Men's Final Four, which were carried by Turner networks this year.
Yet looking forward, CBS is bullish for several reasons, the article continues. One, in the wake of the spinoff of its outdoor advertising business, the company is now less reliant on advertising revenue than ever.
"We're now much closer to a 50/50 split of advertising and non-advertising revenue," CBS Corp. CEO Les Moonves said during an earnings conference call.
Additionally, the company is putting more emphasis on owning content to earn more licensing and syndication revenues.
"One of the things that clearly has changed about our businesses is that the back end of the show's revenue is now as important, if not more important, than the front end from advertising," Moonves said. "Ownership of content is the key to our success."
He noted that CBS has increased the number of shows that it owns on its prime-time schedule and will have ownership in four out of five new series on CBS this fall. All in all, it will have ownership in more than 70% of its total lineup.
As for the parts of CBS Corp.'s businesses that will remain reliant on advertising, Moonves said there are also reasons for optimism there due to the introduction of the C7 commercial ratings currency and dynamic ad insertion.
"The C7 deal will shortly become the only measurement of any relevance," Moonves added. "Marketers want to get a more precise count of all the impressions, and overnight ratings and other daily ratings are totally antiquated. We now have VOD, SVOD, AVOD. It's a lot of letters, but it adds up to bigger numbers in viewers and revenue."
Yet even if the ad market continues to improve, Walt Disney Co. said it is also following a strategy of less reliance on advertising revenue. Despite an increase in advertising revenue at its cable networks year-over-year, due in part to ESPN’s carriage of The World Cup, CEO Bob Iger said during an earnings conference call that Disney was moving away from relying on ads.
"We've made a conscious decision as a company to essentially not be as reliant on advertising as we were in the past. So it represents probably somewhat in the neighborhood of the low-20% range of our total revenue," he said. "That's pretty purposeful because we see a much more competitive environment out there for advertising."
One major reason for the increasing competition is the rise of digital platforms and the potential for ad dollars to shift online.
"We intend to participate in that environment in the sense that by moving product onto new digital platforms, we fully expect to gain revenue on the digital advertising front, but I think you're going to see basically continued pressure on traditional advertising platforms," he said.
Fortunately for Disney, the company has a number of growing business segments that do not rely on advertising at all, including its theme park business.
