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Air Ball: NBA Lockout Throws Ad Sales Off Targets

The National Basketball Association lockout
in December helped drive down advertising sales at three
top cable network conglomerates in the calendar fourth quarter,
but the resumption of the games, as well as some signs of
recovery in the overall economy, have some network executives
optimistic about a better run in 2012.

The Walt Disney Co., News Corp. and Time Warner Inc. all
reported quarterly results last week, with Disney’s perennial
ratings giant — sports network ESPN — reporting flat ad
sales, mainly because of the lockout. The same held true at
Time Warner Inc., which relies heavily toward the end of the
year on NBA ratings for its Turner Network Television, where
ad sales rose 2%.

The NBA reached a deal with players in November, and regular-
season games resumed on Dec. 25, but the group truncated
the 2011-2012 season to 66 games instead of the traditional
82 games.

The pain was lessened at News Corp. — where exposure
to the lockout at its Fox Sports regional sports networks was
eased by strong performance at its Fox News and FX channels
— with domestic advertising revenue up 6%. Excluding
its RSNs, ad sales at the cable nets would have risen 14% in the
period, the company said.

Strong affiliate fee growth helped off set the sluggish ad market
at all three companies. At Disney’s cable networks, a 16%
increase in carriage fees helped drive an 8% rise in revenue
and a 25% increase in segment operating income in the quarter.
Domestic affiliate fees rose 9% at News Corp. and increased
an estimated 5.2% at Time Warner in the quarter.

But the return of NBA games on Dec. 25, and some signs
that macro-economic factors like housing starts were showing
improvement, encouraged the programmers, which all see ad
growth accelerating in the coming quarters.

On a conference call with analysts last Wednesday, Time
Warner chief financial officer John Martin said ad growth
was tracking in the mid-single digits, refl ecting positive ratings
at most of its cable networks. Scatter pricing also is trending
above upfront levels, although volume is lagging that of
recent years.

Th e other programmers also were encouraged by ad trends
— Disney said ad revenue at ESPN was pacing up single digits
and it expects the sports juggernaut to have a strong fiscal
second quarter.

And though ESPN aired 29
fewer NBA games in the December
quarter, it will finish the season
airing the same number of
contests as the prior year.

“The trends that we’re seeing
in advertising are good,” Disney
CEO Bob Iger said on a conference
call with analysts Feb. 7,
adding that it has already sold
out the 84th Annual Academy
Awards on Feb. 26 and ratings for
the NBA are up almost 40% from
the prior year.

“I would say the advertising
marketplace is healthy,” Iger said.

News Corp. chief operating officer Chase Carey said on a conference
call Feb. 7 that ad sales in
the March quarter are trending
up in the double-digit percentage
range at FX and in the mid-single-digit range at its RSNs.

“The advertising markets, while not as robust as they
were six-plus months ago, remain solid,” Carey said on a
conference call with analysts.

Martin said the NBA lockout could have a longer-term
effect on Turner ad sales; ad dollars that went elsewhere
during the period when no games were played could take
a while to return to the normal advertising cycle.

That lack of optimism is, perhaps in part, due to TNT
losing about seven NBA games for the season as a result of
the work stoppage. TNT will air about 45 games this season,
compared with 52 games last year. ESPN will air 75
games, and NBATV will have 96 games, the same number
of contests as their pre-lockout schedules.

R. Thomas Umstead (programming editor) and Jon Lafayette
(business editor,

Broadcasting & Cable

) contributed to
this report.