TV studio profits declined 3% in 2016, MoffettNathanson says

Overall TV studio profits for networks including CBS, ABC, 21st Century Fox and Time Warner declined by 3% last year, according to analyst firm MoffettNathanson.

Over the past five years, the firm estimated that growth slowed in TV studio revenues and EBITDA. The compound annual growth rate was 2% from 2012 to 2016.

The firm blamed the studio slowdown in 2015 on the deconsolidation of Shine at 21st Century Fox, but said that 2016 was the first year of low-single digit revenue growth and a decline in profits.

“We believe the declines in program sales to traditional domestic cable networks and domestic SVOD players are finally starting to show up in company profits,” wrote MoffettNathanson in a research report. “While international syndication remains robuts, it is now apparent that the domestic weakness is something that could continue to pressure TV studios.”

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CBS could have the highest exposure to risk if TV studio revenues and profits continue to trend downward. According to MoffettNathanson, in 2016 CBS recorded 27% of its total company EBITDA from its TV studio.

Time Warner’s TV studio account for 13% of its total EBITDA, 21st Century Fox’s TV studio accounted for 10% of its total EBITDA, and Disney’s TV studio accounted for 3% of its total EBITDA. The firm estimated that Viacom’s TV studio, after recently ramping up its production, is just “modestly profitable.”

The decline for TV studios could be due in part to scripted series having a harder time finding audiences than sports and live programming. MoffettNathanson broke out viewership by entertainment and sports programming and found that overall viewership was down double digits for nonsports programming.

Nonsports viewership declines were the least impactful for ABC and NBC—both of which saw 10% declines—while CBS’s entertainment viewership fell 13% and Fox’s dropped a whopping 20% thanks to the absence of “American Idol.”