Editor’s note: Adweek worked with Matthew Scott Goldstein, a consultant with a deep knowledge of the media industry, to craft his quarterly newsletter into an Adweek article. Through his findings on various industry earnings calls, we’re bringing you insights about how your favorite brands, agencies, media companies, publishers and tech companies are performing on a quarterly basis. His goal was to go past what the trades were focusing on, which mostly revolved around revenue, and tap into the nitty-gritty data shared on these calls.
This iteration focuses specifically on agencies and media companies in the 2019 third quarter.
- Interpublic Group (IPG): Continued global increases across a very broad range of verticals: healthcare, financial services, retail, tech and telecom and consumer goods. The auto and transportation sector decreased mainly because of last headwinds. A disconnect between business and what’s happening in the stock market and in the global world, if you will, in terms of what’s happening there. The uncertainty obviously is not helpful. Marketers have money and they’re willing to spend. The difference between now and in a stronger environment is today is very project-oriented. Marketers are concerned about the economy, but they realize that marketing with IPG actually works and they have to spend dollars to build their brands. Of course, no mention of Google, Facebook or Amazon.
- Disney: Disney+ is a combination of four years of planning, organizational transformation and a lot of hard work, and we’re excited to be on the verge of this new era. ESPN+ was an immediate hit with sports fans when it launched last year and continues to deliver steady growth. ESPN+ has over 3.5 million paid subscribers. Acquisition of 21st Century Fox was largely driven by the value it brought to our overall DTC strategy, adding a number of critical elements, including control of Hulu, which opens numerous growth opportunities domestically and internationally. At launch, Disney+ users will have immediate access to more than 500 movies, including all of our beloved titles and more than 7,500 episodes of library television content, including 30 seasons of The Simpsons. By year five, this growing collection will include more than 620 movies and more than 10,000 television episodes along with countless shorts and features. ESPN’s domestic linear advertising revenue was down 2%, and, so far this quarter, ESPN’s domestic cash ad sales are pacing up 3% compared to last year. Ad revenue at the ABC Network was up modestly in the quarter; quarter-to-date prime-time scatter pricing at the ABC Network is running 47% above upfront levels. Hulu is a significant driver of advertising revenue, and will continue to be, particularly as we grow Hulu. Ad-supported Hulu has very high RPU, which is one of the reasons that it’s being bundled with ESPN+ and Disney+ for that $12.99 price, because the value of an ad-supported Hulu subscriber given the advertising revenue that it drives is very, very high.
- Comcast: It goes without saying the utility and demand for high-speed and reliable internet access are ever increasing. See this in customers’ behavior: Monthly data usage more than doubled in the last three years, and our power users are connecting nearly 20 devices in their homes daily. Surpassed 55 million customer relationships. Added 1.3 million broadband customers over the last 12 months. Total video subscribers declined by 2.8% year-over-year to 21.4 million; we continue to be disciplined and are not chasing unprofitable subs. Content continues to resonate with consumers. NBCUniversal has the largest TV viewership share of any major media company in the U.S. and is one of the leading film businesses in the world. NBC is No. 1 in prime time among adults 18-49 for the sixth consecutive 52-week season. Telemundo was No. 1 in Spanish-language weekday prime for the third consecutive season. Cable networks revenue decreased 2.8% to $2.8 billion. Broadcast revenue decreased 9.1% to $2.2 billion. Advertising revenue declined 12%, primarily reflecting a difficult comparison to last year’s results, which included Telemundo’s broadcast of the FIFA World Cup. For the remainder of the year, we have a positive outlook on the ad market with the start of the NFL season and the return of original entertainment programming, as well as the benefit from higher upfront pricing. Regarding Peacock, announced about a month ago the name and listed a fair number of shows that we’re going to have on the service. Most important thing to think about as you’re thinking about Peacock and its role inside NBCU and broader Comcast is we’re not doing the same strategy that Netflix and people chasing Netflix have adopted. We’re primarily working with the existing ecosystem and doing a lot of AVOD activities. Comcast thinks that will cut the investment pretty substantially, going to get to cruising altitude much more quickly than a subscription service. In terms of the Peacock spending, marketing plan, going to remain pretty quiet until a month or two before launch in terms of the details, for competitive reasons.
- Discovery: Strong 5% domestic advertising growth, marked by accelerating performance at both the legacy Discovery and Scripps Networks on the back of improved ratings, healthy overall pricing, nice growth on our TV Everywhere apps and strong execution by the sales and network teams. Ratings momentum has been an outlier in an industry where both cable and broadcast performance has been increasingly soft. Discovery is the No. 2 TV company in America, including both broadcast and cable, with NBCUniversal being the only company in the U.S. that reaches more people and is larger. On any given night, getting between a 3 and a 4 rating in women 25-54 across the portfolio, and typically exceeding a 4 rating on Sunday night. And across the pay-TV universe alone, achieving between a 5.4 and a 7.2 rating in women 25-54 across the portfolio. Putting some context around this, premium IP in the U.S. today is incredibly scarce, with perhaps the NFL as the very top of the pyramid with respect to aggregating both male and female demographics in large scale. And advertisers pay a significant premium for this IP. So, if you’re an advertiser buying the NFL to reach women, you could reach the same number by buying one spot, a roadblock, across our top women’s networks: HGTV, Food, TLC, ID and OWN. It’s like a women’s super-pack. I believe Discovery can intercept some of those huge CPM, NFL or broadcast dollars, which would be a big win for advertisers, because it would be at a much lower CPM, a big increase for Discovery and a huge reach. And it’s something that nobody else can do because Discovery has this ability now to aggregate so many compelling and strong female networks. It’s one of the “wow” reveals of Discovery and Scripps coming together. Third-quarter U.S. total revenues were up 4%, with 5% advertising growth and flat affiliate revenues. This was an outstanding quarter for our U.S. ad sales. The better-than-expected 5% growth was due to a combination of solid ratings, strong pricing, strong demand driving additional inventory, and continued monetization and integration of our GO platform and digital offerings. We are benefitting from overlaying smart cross-promotional activity against an increasingly large footprint, which, on certain evenings, is delivering a near 30% share of women watching television. For the fourth quarter, we expect continued strong pricing and continued monetization of digital as Discovery expects further success of our GO apps, slightly. Some color around expanded Hulu partnership: Cannot comment on specific deal terms, but there are some key high-level points that are important. This is a mutually-beneficial deal, where both sides will see incremental value. We are extremely pleased with the solid economics Discovery received. This is one of the main drivers of Discovery’s expected growth acceleration in 2019. There are many elements of the deal, including additional SVOD hours and an increase in our channels carried to a total of eight Discovery networks in the base package on Hulu with Live TV. Also pleased that additional networks will be available on the new Hulu with Live TV tier packages later this year. The deal has strong carriage projections, as do all of our deals for our top networks. And, overall, will see incremental economics next year and remain excited about our ability to drive greater returns from this distribution partnership as Hulu adds additional subs.
- News Corp.: $2.34 billion represents a decline of 7% year-over-year. There has been a fundamental change in the content landscape. For over a decade, News Corp. has led the international debate in seeking fair returns for our high-quality content from the digital platforms. Clearly, the dominant digital platforms are under intense and continuing regulatory scrutiny on issues such as privacy and an opaque advertising market. There has, however, been a substantial development with Facebook’s decision to pay a significant premium for our premium journalism at the WSJ and beyond. This decision begins to change the content equation, and we expect a positive impact on financials at our News and Information Services segment over the long term, beginning this fiscal year. The Facebook deal complements the agreement we reached with Apple in March when The Wall Street Journal became a launch partner for Apple News+, which expanded the reach of the Journal and its journalism to new audiences. Our brands and content obviously benefit from the marketing prowess of a partner, which has nearly 189 million phones in the U.S. and 1.4 billion devices globally. We expect the sectoral shift in the value of digital content to have significant implications for our investors and our bottom line. These unprecedented changes in the publishing industry would not have been achieved without the determination of Rupert and Lock and Murdoch and the unwavering support of the board, which has taken a long-term principle stand on the need to change the digital ecosystem. Other publishers around the world should feel free to send us a commission for services rendered. Consistent with that theme of simplification, we have our Unruly ad-tech business under strategic view and are also in discussions about a potential sale. We learned much from the very talented team at Unruly, and those lessons will inform our ad business for many, many years to come. Advertising revenue at Dow Jones grew 2% in the quarter and led notably by strong digital outperformance at wsj.com, which grew 13% as compared to a decline of The New York Times. It’s led by digital growth with a relatively stable print performance. Digital advertising accounted for 42% of total Dow Jones advertising compared to 37% last year. Took the bold step of sharply increasing the cover price of The New York Post in June, and there has been a 12% year-over-year increase in circulation revenue. Advertising also rose at a similar rate. It is worth noting that more than 70% of the Post advertising revenues in the quarter were digital. The Facebook deal is a big deal. It establishes a clear precedent of paying a premium for premium journalism. And there are a couple of other initiatives that are notable. When you click on a headline in the Facebook News tab, you’ll be taken to our site. So the story is not hosted by Facebook. And that means that we’re able to sell advertising directly, and we’ll have a more lucrative flow of permission data. And these were all essential preconditions for our ascent and our agreement, and will have a long-term benefit on our accounts. The digital advertising market is dysfunctional. The so-called open market is a virtual monopoly. We’ve been very public about our concerns on that segment, which is in dire need of reform, and is thankfully now under close scrutiny by 50 U.S. attorneys general.
- CBS: Revenue of $3.3 billion grew 1% from last year when we had record political spending. Digital advertising for network content across platforms grew 19%. So we are adding intellectual property to our content pipeline, which gives us even more strategic windowing opportunities in the years to come. Direct-to-consumer revenue was up over 39% for both the quarter and year-to-date as consumers shift from traditional bundles to skinnier bundles to CBS All Access and to Showtime OTT; we are getting paid higher rates per sub. Our rapid growth in DTC means that our total subs are growing as well. Underlying network advertising revenue was up 2% for the quarter. And the momentum continues here in the fourth quarter with strong scatter pricing and steady advertiser demand. In one major example, starting next September, Nielsen’s measurement of out-of-home viewing will be included in our ratings. So we will have an opportunity to monetize this viewing for the very first time. The NFL offers a great example here. Nine weeks into the season, the NFL on CBS is off to a strong start, up 6% year-to-date. When you factor in out-of-home viewing, we get an additional 11% lift to that increase, and, while sports is an obvious beneficiary, we are also seeing increases in out-of-home ratings in our prime time, daytime and news programming, which we will begin monetizing next fall, and, at CBS News, our emphasis on quality reporting is leading to additional opportunities as well.
- iHeart Radio: Revenue of $948.3 million, up 3% year-over-year with digital revenue increase 33.4% year-over-year. Audio has never been hotter, and iHeartMedia has leadership across all major platforms: broadcast radio, streaming radio, podcasting and social. Approximately 135 million registered users, 20,000 live events and 211 million fans on social media. Consumers spend 30 minutes a day with us on average, whereas Google and Facebook’s audiences averaged 26 and 18 minutes per day, respectively. As the leading audio company in the U.S., we’re benefiting from that. The most prominent example of this has been Procter & Gamble, who’ve been a vocal leader about their shift back to radio and which just matched its strongest quarterly sales growth in over a decade. And we believe its performance since shifting its media mix back to include radio is no coincidence. The reality is consumers have never left radio. Radio’s reach has remained constant, above 90% dating back to the 1970s, while TV steadily declined from 95% in the early 2000s to 86% today. First, the podcasting industry is growing rapidly and shows no signs of slowing down. In fact, the Forrester Research report that was published earlier this week estimated that the podcasting industry could reach $1 billion by the end of 2020. iHeart is the No. 1 commercial podcast publisher based on Podtrac’s rankings, which are the industry standard for measurement. No. 1 priority is getting new advertisers to try us. We also have an opportunity to solve advertisers’ problems with TV’s declining reach and its large segment of light viewers by adding radio to the mix. Automated self-serve advertising product called AdBuilder, which is now in beta. AdBuilder creates customized audio ads for advertisers using proven techniques to get their businesses heard based on information the advertisers share about the businesses. We believe that this represents a long-term opportunity for us to capture the long-tail small-business advertiser that has historically been unavailable to us because of the economics of using a live salesperson. We do want to be clear, however, that we expect the adoption period to be very gradual over the next three to five years before it begins to reach critical mass. More details on this to come, but we’re extremely excited about the AdBuilder product as it aligns with one of the key revenue opportunities, which allows us to efficiently begin to address the 7 million small businesses that are uneconomic for our salesforce to call on instead of just the 60,000 clients we reach today. The two big digital players have proven this market and the opportunity, and we’re rolling out our product to serve it as well.
- New York Times: Now have more than 3 million subscriptions to our digital news product, more than 4 million total digital subscriptions and just under 5 million total subscriptions. Added 273,000 net new digital subscriptions in the quarter, of which 209,000 were subscriptions to our core news products. That 209,000 was 46% more than the equivalent net adds in the third quarter of 2018. In the third quarter of 2019, we also made a significant change to our pay model. Most anonymous users now have to register and log in to The New York Times if they want to read more than a very limited number of stories. Now it’s much easier for us to encourage these logged-in users to engage more deeply with our content and consider subscribing. And we certainly saw a positive effect from this change in our net subscription adds during the quarter. Increasing run rate of new subscriptions makes our goal of hitting the 10 million total subscription milestone by or before 2025 look well within reach. Facebook News is a new initiative within the broader Facebook experience that is intended to offer users a curated selection of news from quality sources. Under the agreement, The New York Times will make its content available in the form of headlines, very short summaries and links. A small number of stories, under 1% of the whole, will be unlocked so that Facebook users can read them in their entirety. To do so, just as with the other stories, users will have to move from Facebook to our digital assets. Facebook News should bring new users to the Times. Consumption of the overwhelming majority of stories will increment our pay meter and support our subscription model. But we chose to participate in the model only after we reached a multiyear agreement for a license fee, which is a step change compared to previous content deals. This is the first time that a Silicon Valley major has recognized the value of Times journalism to its platform with a substantial multiyear fee. Digital advertising fell by 5% year-over-year in the third quarter, as I said, a little less than we predicted, and print advertising by 8%. The main reasons for the decline on the digital side were a tough comparison with the third quarter of 2018 and fewer large deals than we achieved in that quarter. We talked about this variability or lumpiness in the large-scale deals before. Expect this pattern to continue into the fourth quarter. We face an even more daunting comp: Digital advertising grew in the fourth quarter last year by 32% on a like-for-like basis, with several individual partnerships, including one that brought in nearly $10 million not repeating. We’ve described ourselves as a subscription-first company. And where there is a trade-off to be made between engaged user experience and a media advertising revenue, we will increasingly favor the subscription side. Our iOS and Android apps are the digital services that drive the highest per-user consumption of our journalism. We’ve decided that beginning January 2020, in an effort to improve low time and the overall user experience, we will no longer present open market programmatic advertising within these apps. That will result in the loss of digital advertising revenue in the single-digit millions, but we believe that this will be more than made up by gains in engagement and a higher propensity by app users, both to subscribe and retain. The decrease in digital advertising revenue is largely driven by declines in our core direct sold platforms, partially offset by continued growth in podcast. The print advertising result was mainly due to declines in the financial services, home furnishings and luxury categories, partially offset by growth in the advocacy category. The success of our price rise tests and our growing confidence in our ability to deliver discrete messages to different segments of our subscriber base has convinced us that we can execute a price rise for tenured subscribers with minimal risk of reducing new subscriber growth momentum. Overall advertising revenues and digital advertising revenues are expected to decrease in the mid-teens compared with the fourth quarter of 2018. The Daily is a monster hit, with an astonishingly valuable audience, and it just continues to grow with more than 2 million listens a day and three-quarters of this audience is 40 years old or younger; 45% is 30 years old or younger.
- Viacom: $3.43 billion in revenue, down 1% year-over-year. Viacom maintains the No. 1 share of U.S. basic cable viewing among key demographics, and our portfolio grew market share in the quarter. Moving to domestic ad sales, thanks to the combination of our vibrant brand and strong ad sales execution, including our sophisticated suite of advanced marketing solutions, we delivered 6% ad growth, marking the second consecutive quarter of positive performance. In particular, the success of our advanced marketing solutions business, where revenue grew 83% in the quarter, shows how we’ve evolved the ad sales business to thrive even in the phase of linear impression constraints. Pluto TV is, of course, one of those strategic acquisitions and has quickly become an integral part of our AMS offering. Pluto TV continues to grow, expanding its leadership in the free streaming TV space and its contribution to our ad sales growth. It now has approximately 20 million domestic monthly active users. Viacom owned more top-30 original cable series in the quarter than any other cable family among key demos.
- IAC/Dotdash: Adjusted EBITDA doubled, and revenue grew 34% year-over-year, up from 23% growth in the prior quarter. Now have emerging brands in seven high-intent categories—health, finance, home, food, tech, travel and beauty. The opportunity in beauty alone is measured in billions. Dotdash—in the fourth quarter we expect revenue growth over 25%. Look at each vertical as a huge opportunity. In health, ranked in the top five when you look at audience. In health and some very big players ahead of us, in terms of both revenue and profitability, and we’ve been very focused on innovating in product in this area. Always focused on having the best and freshest content and the fewest ads. Monetized with other format of advertising: ecommerce as a format of advertising, sending audience on to other sites. Finance has several huge players in front of us. Doing very well with Investopedia and The Balance, and we’re going after the people who are bigger than us with bigger audience and bigger revenue. Beauty is another one. Home’s another one. All these are multibillion-dollar categories of advertising online where we can deliver really compelling content. More and better content in our existing category in 2020. And then we’re going to continue to look for acquisitions in new verticals or new additions in our existing verticals.
- Meredith: Total company revenues from continuing operations were $725 million, compared to the prior year of $774 million. The prior year included $33 million more of cyclical high-margin political spot advertising in Meredith’s Local Media Group. Digital advertising revenues grew 8%, driven by growth in Meredith’s programmatic platform. Print advertising performance was down in the mid-single digits compared to the prior year, in line with Meredith’s historical performance. The EatingWell, Southern Living, Real Simple and InStyle brands all generated growth in print advertising. Been adding a number of people in helping us produce more content, and more video content, specifically. And when we look at the first quarter that we just closed, we’ve had some great trends in video. So overall, video revenue was up 20% in the first quarter, and video views were kind of up in that mid-double-digit range. The other area that we’re looking at investing is in consumer, what we would call our consumer digital business. A lot of that’s in ecommerce.
- J2 Global: Digital media grew over 21% to $173 million. Particularly pleased with the 34% growth in digital media subscription revenues. Completed four acquisitions in the first quarter, and two acquisitions in the second quarter, making the total number of acquisitions this year 10. Generally speaking, seeing attractive deals across the markets in categories in which we operate. Organized the company into 13 business units. Of the 13, five of the units are below $75 million in annual revenues. As we continue to grow as a company, it’s a priority to scale these units to be north of $75 million and ultimately north of $100 million in annual revenues. Since January 2018, of the 21 deals that J2 has consummated, 11 were in cloud services, and 10 were in digital media, with 11 of the 13 business units closing at least one transaction. Through a combination of organic growth and programmatic acquisitions, we have more than doubled our revenues over the past five years. BabyCenter: The parenting and pregnancy space is a very attractive one to us. It sits at the nexus of a broad range of digital health extensions including fertility services, women’s health, child and family health care and genetic health services. By owning both BabyCenter and What to Expect, believe we have become a global leader in this vertical where users can be served at every stage of the pregnancy and parenting journey. From a value-creation point of view, this is very similar to our past digital media acquisitions. We see opportunities for business model innovation, as well as focusing the business on profitability. On the former, we have at What to Expect and many of the J2 digital media brands a great track record with performance marketing solutions, where we generate customers and leads for our clients. Today, the BabyCenter business is primarily display advertising, while the What to Expect business makes a majority of its revenues from performance marketing. We believe we can successfully implement performance-based solutions at BabyCenter to drive growth. Continuing good display advertising revenue. If you can be a cash buyer in the digital media industry, which we are, and historically have been, I think it’s a buyer’s market. Deployed over $420 million for acquisitions this year in the nine months. Video is a key part of how we monetize properties today inside of the advertising business. You know IGN has got a substantial video business. Mashable has got a substantial video business. Everyday Health has a video business. So video has been part of our advertising mix for a while. We don’t do as much in audio. We know it’s the space we’ll look at. In our advertising business, I see a couple of things. No. 1 is the display business continues to grow. And it’s been growing for four consecutive quarters after there was a period of time when we were having some challenges. The customer-generation performance marketing components of what we do, where we’re not selling CPM advertising, cost-per-thousand display advertising, but we’re selling cost per clip, cost per lead, cost per acquisition, that is sort of that. That is what the marketplace is really looking for. Can you generate customers for us? Can you get us measurable ROI where we’re fitting into their LTV equations? That’s where we do our best. And so any format that can produce those outcomes we’re interested in. There are a lot of interesting acquisition opportunities for us right now, and I think again depending on where the markets are and what business climate is, there may be even more. So I’m optimistic from an acquisition point of view in terms of what the next 12-36 months will look like. There’s an anti-unicorn sentiment that seems to be pervading the marketplace. In terms of general macro conditions in the U.S. I think we see it to continue to be good and stable.