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Pali Analyst Predicts Further Ad-Decline for Viacom

Pali Capital analyst Richard Greenfield thinks that Viacom's cable unit will have a tough second half of 2009.

In a note released Aug. 25, Greenfield projected that ad revenue would fall 7% over the period, a point higher than the 6% decline the company saw in the second half. Greenfield also significantly reduced earnings estimates for 2010, citing a likely ad-revenue drop of 3% rather than 2%, Greenfield's prior prediction. Viacom is forecast to see ad revenue fall about 7% in 2009.

Greenfield is particularly concerned with the amount of unsold inventory around the broadcast and cable business. TV sales executives held back airtime in the upfront sales period with the expectation they can charge better rates once the economy picks-up.

"I think this is more of an industry issue than just Viacom," Greenfield told B&C. "The upfront was pretty challenging. Without a real resurgence in the economy, a lot of inventory is sitting on the sidelines.

Viacom's cable unit--which includes the MTV Networks group--gave advertisers rollbacks in the mid-single digits and is believed to have seen volume down about 15%, though the numbers have not been confirmed by the company. Viacom stock was trading at $26.24 at mid-morning.