AMC Networks’ ratings slide to impact ad Q4 revenue, analyst says

The Walking Dead
'The Walking Dead' is still the cable ratings king but its numbers have fallen a bit. Image: AMC

AMC Networks could be staring down another slow quarter for advertising revenue growth.

In a research note, Jefferies analyst John Janedis said that fourth quarter advertising growth will clock in around 1 percent instead of the six percent he had previously forecast. Janedis based his adjustment on AMC management comments this week that pegged full year domestic ad growth at around 4 percent.

Janedis pointed toward weaker ratings as the culprit and noted that even The Walking Dead was not immune to flagging viewership.

“Although it remains the most watched show on cable television by a wide margin, ratings for The Walking Dead have trended lower in recent weeks. After premiering to 17M viewers (+16% YoY), the show is now down ~8% YoY on average through the first seven episodes (P2+, Live +SD),” Janedis wrote.

Despite a disappointing 2016, AMC is still eying strong ad revenue growth for 2017. Jefferies mostly agreed, saying domestic ads will “remain a growth driver in 2017 (JEFe: +4%), largely driven by an increase in original hours. However, ratings trends for key franchise programming (i.e. TWD, FTWD) remains a key risk.”

RELATED: AMC Networks' Q3 profits fall as cable networks struggle

Lower ratings caused issues for AMC in the most recent quarter as well. While distribution revenue jumped 8 percent to $336 million, due to an increase in licensing revenues and affiliate fees, Networks advertising revenues decreased 9.9 percent to $189 million because of lower ratings.

In all, AMC Networks’ third-quarter profit dropped about 11 percent as operating income for its cable networks fell sharply. Net income fell to $65 million as operating income dropped 26.5 percent on the back of a 19.6 percent decline at AMC’s National Networks division, which consists of AMC, WE tv, BBC America, IFC and SundanceTV.

AMC, of course, is not alone in experiencing lower ratings recently, with the NFL’s ratings woes standing out the most. The good news for the NFL is that average ad rates for its broadcasts are trending up.

According Standard Media Index’s numbers for September, the average 30-second spot among networks showing NFL games in September was $489,193, up 4 percent from the same period last year and up 10 percent from 2014.

“Our new cost level data clearly shows that while ratings on football have been under pressure early in the season, average unit costs continue to increase. This demonstrates that live sport and the huge audiences it attracts are an outstanding drawcard for major brands,” said James Fennessy, CEO of SMI, in a statement.

RELATED: The 2016 World Series more than doubled TV ad revenue from the 2015 Series

In October, live sports continued to help the major broadcasters ring up ad sales. Fox, in particular, enjoyed a huge ratings boost for the 2016 World Series which churned out a 111-percent increase in ad revenue as compared with last year’s World Series.

Still, revenue boosts from live baseball and football didn’t translate into revenue wins for all networks involved. While Fox saw total TV ad revenue climb 32 percent and NBC’s revenue jumped 17 percent, CBS’s revenue actually fell 7 percent.