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Analyst Expects Q3 Ad Revenue to Be Down 1%

Citing lower ratings despite easy comparisons for the networks that didn’t carry the Olympics a year ago, analyst Michael Nathanson of MoffettNathanson Research expects that when media companies report earnings over the next few weeks, they’ll be chalking up another quarter of declining advertising revenue.

“Let’s not sugar coat this, 3Q media trends are scary on almost every front,” Nathanson said in a note Monday (Oct. 16).

National ad growth will be down 10% in the quarter—1% if you take out the Olympics from a year ago—according to Nathanson. Broadcast will be down 19%--but up 1% excluding NBC’s Rio Games—while cable will show a 4% drop.

Fox will be up 1%, CBS down 2% and ABC down 10%. Compared to last year’s Olympics driven quarter, NBC will be down 29%.

Among the best performing cable network groups should be AMC Networks, up 3%, and Discovery Communications, up 2%.

Nathanson sees Scripps Networks flat, Viacom down 2%, Time Warner down 3% and Disney down 5%. NBC’s cable networks, which carried the Olympics a year ago, are expected to be down 16%.

Nathanson notes that while the unadjusted 10% drop would be the biggest in the past six years, the adjusted 1% decline would be an improvement from last quarter.

Nathanson expects ad sales to be up in the fourth quarter, “but given current ratings trends this could prove to be too optimistic,” he said

Nathanson is expecting basic cable affiliate fees to be up 7% in the quarter, up slightly from 2Q, driven by gains at Time Warner’s Turner and Fox. He expects Viacom, now in the middle of a carriage battle with Charter, to report a 0.1% decrease in affiliate fees. Comcast’s NBCUniversal is likely to report a huge 71.7% jump in retrans.

Affiliate fees are under pressure because of cord-cutting and other activity that is cutting into the number of traditional pay-TV subscribers. That is being offset somewhat by increases in subscribers to virtual MVPDs such as Hulu Live and DirecTV Now.