/// Viacom Loads More Ads on Channels
WSJ.com – Fewer people have been tuning into some of Viacom Inc.’s VIAB -0.65% cable channels over the past year, so the company has turned to a timeworn but controversial method of maintaining ad revenue: adding more commercials.
According to data from TV-research firm Nielsen, the media conglomerate’s Nickelodeon and Comedy Central networks boosted the amount of ad time they aired in the first half of 2012 by 9% from a year earlier, to a combined 1,901 hours. That followed a 7% rise in all of 2011 and a 4% rise in 2010, Nielsen found.
As viewership drops at some of Viacom’s channels, what the company receives for a typical commercial spot can decrease. Increasing the amount of commercial time allows Viacom to make up some of the impact of the sharp ratings declines.
Viacom’s U.S. ad revenue fell 7% in the June quarter from a year earlier, after rising 1% in the March quarter. But that compared with a 29% drop in viewership at Nickelodeon, one of the company’s biggest channels, in the first half of the year, according to a report by Barclays Capital, based on Nielsen data. Other Viacom channels, including Comedy Central, have also lost viewers, but by a much smaller degree.
Viacom acknowledges that it has increased the load of ads, describing it as a short-term strategy. “We see this increased commercial load as a temporary situation that we will address as ratings improve,” a company spokeswoman said. Viacom Chief Executive Philippe Dauman said earlier this month Nickelodeon was “beginning to show momentum.”
Media buyers, however, warn that adding more commercials can alienate both viewers and advertisers. They say that consumers have a certain amount of tolerance for advertisements, but don’t like commercial breaks that run on too long. And if the amount of clutter reaches a certain level, commercials won’t resonate as well with viewers.
“It is disappointing that Viacom networks continue to shore up their ratings underperformance by adding incremental clutter to an already crowded commercial environment,” said Jason Kanefsky, executive vice president of strategic investments at MPG, an ad-buying firm owned by Havas HAV.FR -0.44% SA. “This strategy seems disconnected with their clients’ needs,” he said.
Even before the latest increases, Viacom’s channels were known to generally have heavier loads of commercials than many rivals, ad buyers say. The precise amount varies by channels. One buyer estimates that the average number of prime-time commercial minutes per hour ranges from 12 minutes and 30 seconds at MTV to 16 minutes and eight seconds at Nick at Nite. Nickelodeon, which aims at children, has a lower ad load, with nine minutes and 26 seconds, the buyer estimated.
Viacom didn’t disclose how many commercials it runs during its shows.
In contrast, Walt Disney Co.’s DIS +0.14% ESPN plays nine minutes and 27 seconds of commercials per hour and Discovery Communications Inc.’s DISCA +0.66% Discovery Channel plays 10 minutes and 59 seconds, the person said. Discovery and ESPN declined to comment.
One media buyer said the increase in the ad clutter has caused his firm to cut back on what it spends on some Viacom networks. “Nick at Nite has been devalued because of underperforming ratings and it’s been compounded by them increasing the ad clutter,” the ad buyer added.
Viacom isn’t the first network to add more commercials when ratings softened. “It’s a common tool,” says Brian Wieser, a media analyst at Pivotal Research Group. “But you can’t keep making up for shortfalls in ratings by adding to your commercial load. It’s a nice tool to manage short-term problems.”
Another media buyer said that Viacom’s move to increase the ad load is a “double-edge sword,” since increasing the length of ad breaks usually results in ratings falling as viewers are more inclined to leave a show that is overcluttered with ads.
Thanks to the growing availability of Internet video, viewers may be more likely to switch off their televisions if they grow impatient with commercials. Older seasons of some Viacom programs like Nickelodeon’s popular cartoon “SpongeBob SquarePants” can be watched commercial-free on Netflix Inc. NFLX -1.22% Analysts have questioned whether that has contributed to Nickelodeon’s ratings declines.