Growth of cable affiliate fees slows

With the decline in ratings slowing, second quarter ad revenue is likely to be flat as media companies start to report second quarter earnings, according to analyst Michael Nathanson of MoffettNathanson Research.

In a report Thursday, Nathanson upgraded his ad revenue forecast to a 0.5% decline to $9.2 billion. The slight decrease follows five straight quarter of much steeper declines.

On the broadcast side, Nathanson sees revenue down 2.6% to $3.2 billion, factoring gains at ABC from the high ratings Roseanne garnered before being canceled and revenue Fox generated for early World Cup action.

Cable networks show a 0.7% increase to $6 billion. Nathanson adjusted Disney upwards to flat because of additional NBA playoff games and lowered Viacom because of ratings issues. The big gains in the quarter are Fox, Discovery and Time Warner. Viacom is expected to be down 3% in ad revenue.

Nathanson sounded a note of concern in regard to domestic cable affiliate fees. He sees their growth slowing to 4.5% in the quarter, which could be the smallest increase in 4 years as the impact of big-bundle pay TV cord-cutting takes hold.

The quarter has been a good one for media investors, mainly because of the bidding war for 21st Century Fox and the closing of AT&T acquisition of Time Warner.

“The upshot of all this craziness is that media stocks enjoyed their best quarterly performance in a long, long time, with almost every company – except Viacom – significantly outperforming the S&P 500, driven by multiple expansions,” Nathanson said.